HDFC net up 23% on NPA dip, better NIM

HDFC net up 23% on NPA dip, better NIM
The Economic Times, January 21, 2010, Page 10

Net Profit For April-December Stands At Rs 1,900 Cr

Our Bureau MUMBAI

THE country’s largest mortgage financier, Housing Development Finance Company (HDFC), reported a 23% jump in profits for the third quarter as margins improved and bad loans fell. For the quarter ended December 2009, HDFC reported a net profit of Rs 671 crore, an increase of 23% over the net profit of Rs 547 crore in the corresponding quarter last year.

The corporation’s net profits for the nine-month period ended December 2009 stood at Rs 1,900 crore up 23% from Rs 1,549 crore in the corresponding period last year.

The housing finance company was confident of maintaining its margins despite the introduction of teaser loans where the interest is 8.25% in the first year. “We expect to do loans worth Rs 3,500-4,000 crore until the end of January 2009 under the new scheme. We are able to extend loans at this rate because we have managed to raise loans at a cost of around 6.1%, which enables us to still earn a spread of around 2.2%,” said HDFC vice-chairman and CEO Keki Mistry. The special scheme is due to end in January. However, the corporation is likely to review the closure date closer to the month end.

Loan approvals during the ninemonth period ending December 31, 2009, amounted to Rs 41,110 crore against Rs 33,820 crore in the corresponding period last year, representing a growth of 22%. Loan disbursements during the nine-month period ending December 31, 2009, amounted to Rs 33,527 crore against Rs 27,211 crore during the corresponding period last year, representing a growth of 23%. The spread on loans over the cost of borrowings for the nine-month period ended December 31, 2009, stood at 2.25% compared with 2.21% for the year ended March 31, 2009.

HDFC’s net interest margins improved even as it dropped rates on home loans. This was because the institution took advantage of the surplus liquidity to raise wholesale funds from banks at cheap rates. Net interest income from the quarter was up 14% at Rs 1,001 crore compared with Rs 877 crore in the corresponding quarter last year. The net interest income for the nine-month period was Rs 2,778 crore up 13.1% from Rs 2,457 in the previous year. The net interest margin improved to 4.27% from 4.19% last year.

Mr Mistry said he expects some tightening by RBI in its monetary policy in January. However, banks were unlikely to hike lending rates because of ample liquidity in the system. “The only way rates could go up is if demand for credit by corporates picks up,” said Mr Mistry.