HDFC maintains margins despite home loan rate cut

Home financier Housing Development Finance Corporation (HDFC) posted a 27% year-on-year rise in its net profit for the fourth quarter of the last fiscal at Rs 2,862 crore on the back of healthy growth in individual home loans and slower growth in the non-performing assets (NPAs). Home loans grew at 24% over the previous year. The company maintained a net interest margin of 3.3%, which was at the same level as preceding year, despite lowering interest rates on its home loans. As on March 31, 2019, individual loans comprised 74% of the loan book, which stood at Rs 4,06,607 crore as against Rs 3,62,811 crore in the previous year.

HDFC Board has recommended the final dividend of Rs 17.50 per equity share. HDFC share ended 0.40% lower at Rs 2287.30 on the BSE.

The net profit for the year ended March 31, 2019, stood at Rs 9,633 crore compared to Rs 10,959 crore in the previous year. However, the company said that the profits are not comparable with the last year's figures as the profit from the sale of investments last year was Rs 5,609 crore when it sold shares of HDFC Life Insurance at the time of the initial public offer (IPO) as against Rs 1,212 crore from a sale on investments this year.

Keki Mistry, managing director and vice-chairman, HDFC, said, "Profits continued to be robust as individual home loan growth was strong. Margins were flat, this is despite bringing down the lending rates. We have kept up our asset quality, with delinquencies in the fourth quarter lower than the preceding quarter."

Total individual loan disbursements grew 15% during the year, with the average size of these loans at Rs 27 lakh.

The gross non-performing loans as on March 31, 2019, stood at Rs 4,777 crore. This is equivalent to 1.18% of the loan portfolio. The non-performing loans of the individual portfolio stood at 0.70%, while that of the non-individual portfolio stood at 2.34%.

Net interest income for the year ended March 31, 2019, stood at Rs 11,403 crore compared to Rs 9,635 crore in the previous year, a growth of 18%. For the quarter ended March 31, the net interest income stood at Rs 3,161 crore compared to Rs 2,650 crore a year ago, a growth of 19%.

The company said the lower growth in the loan book was due to unfavourable lending environment for non-individual loans that prevailed in the second half of the financial year. It said that tight liquidity conditions, over-leverage and credit rating downgrades led to heightened risks across the corporate sector. "In order to preserve asset quality, the Corporation opted to be prudent by curtailing some of its lending to non-individual loans," HDFC said in a release.