HDFC Limited Q1 FY23 Result Update: Individual loan book strengthens, NII misses estimates.
Housing Development Finance Corporation Limited reported net profit of Rs. 3,669 crores compared to Rs. 3,001 crores, representing a growth of 22% YoY. The drag on net profit was due to increase in provisions, which went up to Rs 510 crore for the June quarter from Rs 450 crore in the March quarter.
The company recorded net interest income (NII) of Rs. 4,447 crores as compared to Rs. 4,125 crores estimated by the analysts. The monetary policy and interest rate actions have had a short-term impact on the net interest income and to a slightly lesser extent on the net interest margin. This has been due to the transmission lag between the interest rate increase in borrowing costs and the increase in lending rates.
In the corresponding quarter of the previous year, due to the second wave of COVID-19, there was ample liquidity in the system and consequently, overnight interest swap rates fell to very low levels, thus expanding Net Interest Income (NII) and Net Interest Margin (NIM). The reported NIM during the quarter ended June 30, 2022 was 3.4%
On account of volatile equity markets, the net gain on investments fair valued through the profit and loss account stood at Rs. 8 crore (PY: ₹ 402 crore)
Dividend income stood Rs. 687 crore (PY: Rs. 16 crore) and Profit on Sale of Investments Rs. 184 crore (PY: Rs. 263 crore).
Non-interest expense ratios were higher largely due to an increase in upfront expenses on staffing, loan processing, branch expansion and information technology to enable meeting the increased demand for home loans. These expenses have been incurred upfront, though benefits will accrue over the ensuing quarters.
On an AUM basis, the growth in the individual loan book was 19%. This marks the highest percentage growth in the individual loan AUM in 8 years.
Disbursements surged during the quarter to Rs 42,000 crores. Individual loan disbursals grew by 66% YoY. The affordable housing loan segment showed a healthy growth of 10% for the June quarter, however, lower than the 14% growth seen a year ago.
The lender holds Rs 13,328 crore or as total provisions against potential delinquencies.
HDFC’s provision coverage ratio remains high. Gross bad loans improved to 1.78 percent of the total loan book for the reported quarter from 2.28 percent in the year-ago period. This was due to a fall in delinquencies in the non-individual loan book and also resolutions.
Delinquencies in the non-individual loan book fell to 4.44 percent for the June quarter from the peak of 5.05 percent in the December quarter of FY22. In the March quarter, delinquencies were at 4.77 percent. Those of the individual book, too, marginally improved to below 1 percent.
The mortgage lender’s revenue from operations increased 13.5% to Rs 13,240 crore as compared to Rs 11,657 crore in Q1 FY22.
The demand for home loans and the pipeline of loan applications remains strong for the quarter. Growth in home loans was seen in both, the middle income segment as well as in high end properties, with 92% of new loan applications received through digital channels.
The average size of individual loans stood at Rs 35.7 lakh compared to Rs 33.1 lakh in FY22. Individual loans comprise 79% of the AUM.
After the announcement of the result the shares of the company closed at Rs. 2377.80, up by 40.25 points or by 1.72% as compared to the previous close of Rs. 2337.55. The stock opened at Rs. 2356. The market cap of the company is Rs. 431,444 crores.
The cost-income ratio for the quarter ended June 30, 2022, stood at 9.5%. The Corporation’s capital adequacy ratio (CAR) stood at 21.9%, of which Tier I capital was 21.4% and Tier II capital was 0.5%. As per the regulatory norms, the minimum requirement for the capital adequacy ratio and Tier I capital is 15% and 10% respectively. The debt to equity (D/E) ratio is 2.83. The return on earnings (ROE) stands at 13.4%. The company’s net interest margin (NIM) is 3.4% during the quarter. The price to earning ratio (P/E) of the company is 18.9. The price to book value (P/B) of HDFC LTD is 2.40.