Graphic: Vipul Sharma/Mint
Graphic: Vipul Sharma/Mint

HDFC: Loan growth maintained, trimmed expenses cheer

While the bulk of the loan book growth did come from the individual segment as always, HDFC's corporate loans, too, picked up pace

Housing Development Finance Corp. (HDFC) gave enough reason for investors to cheer, with its loan book continuing to grow at a healthy 21% and net interest income growth picking up pace as well. That led to the higher growth of 14% in its operating profit for the September quarter from the dismal 7.5% growth in the preceding three months. In the previous quarters, the company’s run rate in operating profit growth was rather slow, compared with its loan book expansion.

While the bulk of the loan book growth did come from the individual segment as always, HDFC’s corporate loans, too, picked up pace. Disbursals to individuals grew by 17.8%, a shade higher than the previous quarter, and the corporate loan book expanded by 13% in the September quarter, compared with 12% in the previous quarter. Given the quickening of the pace, the total loan portfolio grew by 16% to Rs2.75 trillion after adjusting for the sale of loans to HDFC Bank.

The mortgage lender was able to keep its asset quality under check as well, with gross bad loan ratio at 0.76%, little changed from the previous quarter. HDFC also seems to have managed its expenses rather well in the September quarter, with operating expenses falling 10%, sequentially. All this led to the company making a neat 14% higher net profit of Rs1,827 crore.

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HDFC increased its provisioning to Rs95 crore in the September quarter, an 83% rise from a year ago. The lender is known to increase provisions when it gets lumpy profits. While delinquencies are under check, it pays to notice that those from its individual book rose to 0.61% from 0.53%. Further, the lender’s spread from the individual loan book has narrowed to 1.95% from 1.97%. These are no serious worries. But the stock showed a rather tepid response by closing 0.29% down on Wednesday. Its performance has also not been significantly different from the Sensex over the past three months. Given its price-to-book value multiple of 3.5 times FY18 estimated earnings, it is by no means cheap; the company’s strong performance is adequately priced in.