HDFC: On-track performance

Aside from healthy growth in loans, stable margins and low delinquencies — usually the highlight of market leader HDFC’s (Housing Development Finance Corporation) quarterly performance — the company’s increasing focus on the affordable housing segment in the past year is also noteworthy. During the nine months ended December 2017, 39 per cent of home loans approved in volume terms and 20 per cent in value terms have been to customers from the Economically Weaker Section (EWS) and Low Income Group (LIG).

The Centre’s Credit Linked Subsidy Scheme (CLSS) offers an interest subvention of 6.5 per cent on housing loans of up to ₹6 lakh for a tenure of 20 years to these segments. At the overall level, retail loans (including sale of loans to HDFC Bank) grew 23 per cent in the latest December quarter, despite sluggishness in the broader housing finance segment.

Non-retail inches up

Aside from the healthy growth in retail loans, HDFC’s non-retail segment too has been picking up in recent quarters. The growth has been led by lease rental discounting — loan against future rental receipts from lease contracts with corporate tenants. Non-retail loans grew 21 per cent in the December quarter.

While the intense competition in the housing finance space and sharp cuts in lending rates have impacted yields in the past one to two years, HDFC has been able to maintain its spread (return on loans less cost of borrowings) within a narrow band. In the December quarter, the company’s spread on loans stood at 2.29 per cent, similar to the levels seen in the previous quarter, with a marginal uptick in spreads in non-retail loans.

HDFC’s ability to maintain low level of delinquencies over the years has been a key positive. The gross non-performing assets (GNPA) in the December quarter, marginally went up to 1.15 per cent of loans, from 1.14 per cent in the September quarter.

HDFC reported a profit after tax of ₹5,670 crore in the December quarter, against ₹1,701 crore in the corresponding quarter of the previous year. The latest December quarter profit includes one-off gains of ₹5,250 crore on sale of stake in HDFC Standard Life Insurance. Against this, the company has created a special provision of ₹1,575 crore.

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