HDFC Q1 net profit up 19% on strong loan growth

India's largest housing finance company HDFC   on Wednesday reported nearly 19% year-on-year growth in net profit at Rs 1,002 crore, supported by robust loan growth. A CNBC TV18 poll estimate was expecting a similar kind of bottom line growth. Net interest income (NII) or the difference between interests earned and paid out, increased at the same pace of about 19% y-o-y to Rs 1,526 cr.

During the quarter, its loan book expanded by 19% y-o-y to Rs 1.48 lakh crore. This has surpassed the general expectation of loan growth in the housing finance space. R K Verma, the chairman of National Housing Bank (NHB), the regulator for HFCs expected 18-20% credit offtake for home loans in FY13.

The growth in the total loan book, inclusive of loans sold (securitised loans) is 23%, according to a company release.

The composition of loans is divided between retail and corporate loans. While the former formed the majority of loans at Rs 95,400 crore, the latter constituted one-third at around Rs 50,997. The rest portion (Rs 1,865 crore) fell under other category.

"During the quarter ended June 30, 2012 the loan book grew by Rs 7,387.74 crore of which Rs 6,635.07 crore representing 90% of the increase was on account of the increase in the individual loan book," said a company release.

It is noteworthy to mention that equity research firm Macquarie recently downgraded HDFC from 'outperform' to 'underperform' seeking clarity on its accounting standard. It also raised questions on proper disclosure loan sanctions and disbursals. Later, HDFC refuted all such allegations saying that the company follows Indian GAAP (Generally Accepted Accounting Principles).

"Results are on expected lines and margins remain stable," said Dinesh Shukla, senior banking analyst from brokerage firm Sharekhan.

"Going forward, retail asset quality could pose threat in view of economic slowdown, even though home loans have been growing around 20%. The overall loan book growth is pretty decent."

The company's credit exposure to corporates has also fanned some apprehension regarding asset quality. According to market analysts, such loans comprise mostly builders, who are not in a good shape due to gloom and doom in the economy. They are more prone to defaults.

HDFC's gross non-performing loan (NPL) ratio slightly increased from 0.74% to 0.79% quarter-on-quarter while the net NPL too rose by 5 basis points to 0.49%.

Meanwhile, HDFC earned handsome dividend of Rs 159 crore as compared to Rs 131 crore a year back in the same period. Dividends come from its subsidiaries and associate companies. HDFC Bank   is traditionally a major contributor here.

The home loan major earned a profit of Rs 20 crore on the sale of investments (Rs 16 crore in Q1, FY12).

Source: www.moneycontrol.com

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