Merger-bound mortgage major HDFC on Thursday reported an 18 per cent growth in net income to Rs 4,454 crore in the September quarter, mainly driven by higher retail loan sales that hit an eight-year high of 36 per cent.
On a consolidated basis, the corporation reported a higher 24 per cent jump in net income to Rs 7,043 crore from Rs 5,670 crore, buoyed by higher dividends from the subsidiaries, which nearly doubled to 2,046 crore from Rs 1,188 crore. However, the profit from the sale of investments declined to Rs 184 crore from Rs 263 crore.
Corporation has reported a flat net interest margin of 3.4 per cent.
Its vice-chairman and chief executive Keiky Mistry explained that unlike banks, which reprice loans and deposits on a monthly basis, especially in a rising interest rate scenario, housing finance companies reprice loans with a higher lag of 1.5 months while the cost of funds gets repriced immediately. This has had a 10-12 bps compression in the margins during this quarter.
"This lagged transmission is the only reason for the flat NIM in the reporting quarter, and the impact of the lending rate hikes, which we did during this period should be visible from the third quarter.
"As against this in the corresponding quarter last year, due to the second wave of the pandemic, there was ample liquidity in the system and consequently, overnight interest swap rates fell to very low levels, leading to expanded NII and NIM," Mistry told reporters on an earnings call.
Accordingly, the company reported a lower NIM of 3.4 per cent for the reporting quarter. But higher loan sales, especially the retail loans, which rose to an eight-year high of 36 per cent thus offsetting the flat NIM, helped it book a 13 per cent higher net interest income of Rs 4,639 crore.
Its total standalone income rose to Rs 15,036 crore from Rs 12,226 crore in the same quarter last year, he said, adding the company paid Rs 960 crore in taxes during the quarter, up from Rs 890 crore a year ago.
At the collection efficiency of over 99 per cent, the corporation reported a major improvement in the asset quality with the net NPA under the new RBI norms coming down to 0.91 per cent from 1.44 per cent, while gross NPAs (non-retail) improved to 3.99 per cent from 5.44 per cent and the total gross NPAs came down to 1.59 per cent from 2.34 per cent or Rs 9,355 crore.
Overall retail NPAs declined 33 bps to 0.73 per cent while the overall NPAs came down by 56 bps to 1.44 per cent.
The company is carrying higher provisioning of Rs 13,146 crore against Rs 9,355 crore needed.
Accordingly, the credit cost has come down to 29 bps or Rs 987 crore from 33 bps or Rs 1,138 crore a year ago, and Mistry expressed the hope that it will improve further from the third quarter as the rate hikes of the second quarter get booked.
On the massive growth in loans, Mistry said the loan demand has been broad-based as the major metros like Delhi, Mumbai and Bengaluru, which were not so growing in the past two years, have suddenly witnessed a huge demand for loans.
Also, there has been a hike in property prices in these metros, which is visible from the average loan size going up to Rs 35.7 lakh from Rs 33.1 lakh. Mistry also said that as much as 92 per cent of all loan applications are digital now.
Demand for home loans continues to remain strong and growth in home loans has been seen in the mid-income segment and high-end properties, he said.
Mistry said of the total loan book growth, non-individual loans constituted just 19 per cent of which construction loan is down to 9 per cent from 13 per cent, lease rentals down to 6 per cent from 9 per cent earlier and the rest corporate loans.
As of September, assets under management stood at Rs 6,90,284 crore, up from Rs 5,97,339 crore a year ago, of which individual loans at 81 per cent grew 20 per cent, while the total loan book clipped at 16 per cent.
During the quarter, the corporation assigned loans worth Rs 9,145 crore to HDFC Bank up from Rs 7,132 crore and loans sold in the preceding 12 months amounted to Rs 34,513 crore, up from Rs 27,199 crore. Outstanding retail loans sold stood at Rs 93,566 crore.
The corporation sourced as much as 30 per cent of loans from the HDFC Bank during the quarter and 52 from HDFC Sales, which is a fully-owned subsidiary of the corporation and the remaining came in through other sources.
Mistry said the company is sitting on excess liquidity of Rs 41,000 crore up from Rs 21,000 crore a year ago, and it holds Rs 45,000 crore in government securities.
The HDFC counter closed 41 bps down at Rs 2,497.25 on the BSE on a highly volatile trade with the index Sensex closing flat.
