The performance of Housing Development Finance Corporation (HDFC) has been stable on the back of healthy traction in retail loans. Over the past two years, the market leader in housing finance has delivered sound performance despite the structural slowdown in the home loan segment.

During the nine months ended December 2018, 37 per cent of home loans approved in volume terms, and 18 per cent in value terms, have been to customers from the economically weaker section (EWS) and low-income group (LIG).

Led by 19 per cent year-on-year growth in the overall loan book (including sale of loans to HDFC Bank), HDFC reported 18 per cent growth in net interest income. Given that the December 2017 quarter profit numbers include sale of shares in the IPO of HDFC Life Insurance, the earnings of the latest December quarter are not strictly comparable.

Above industry

Despite poor growth in home loans for banks over the past two years, dominant players in the housing finance space, such as HDFC, have been able to maintain a healthy traction in loans. HDFC’s growth in the retail segment has been steady at 23-25 per cent in the past several quarters.

In the latest December quarter, too, retail loans (including sale of loans to HDFC Bank) have grown by 24 per cent year-on-year, after a 26 per cent growth in FY18.

While HDFC continues to maintain its spread (return on loans less cost of borrowings) within a narrow band, there has been some pressure over the past year.

From about 2.29 per cent last year, the spread is a tad lower to 2.26 per cent in the latest December quarter.

HDFC’s ability to maintain a low level of delinquencies over the years has been a key positive. Gross non-performing assets (GNPA), however, have been inching up slightly, owing to increase in delinquency in the non-retail portfolio. In the December quarter, GNPAs stood at 1.22 per cent of loans, marginally up from 1.15 per cent in the same quarter last year.

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