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HDFC reports 5% growth in Q1 consolidated net, limited by impact of rate hikes

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MUMBAI: Mortgage major HDFC on Friday reported a 4.95 per cent growth in its consolidated June quarter net profit at Rs 5,574 crore, limited by the impact of the interest rate hikes on its core income.
On a standalone basis, the largest pure-play mortgage lender in the country reported a 22 per cent increase in net profit at Rs 3,669 crore for the quarter, which was a shade below the street estimates of growth in the high-20s.
Its total income on standalone basis increased to Rs 13,248.73 crore during the June 2022 quarter from Rs 11,663.14 crore in the year-ago period.
Its core net interest income (NII) rose by 8 per cent to Rs 4,447 crore, which was one of the major reasons for the lower profit growth.
The company’s vice-chairman and chief executive Keki Mistry explained that the loan demand has been robust with the overall assets growing by 16 per cent, but the NII was impacted because of the impact of the rate hikes which get time to be passed on to the borrowers.
If not for this “transmission lag”, the NII would have been 16 per cent higher, Mistry said, adding that it expects the NII growth to accelerate from here and normalise during the course of the fiscal year.
There was a narrowing in the net interest margin to 3.4 per cent for the quarter, and Mistry said the elevated levels of the year-ago period were not sustainable.
Mistry said the company has witnessed the highest-ever performance on the asset growth front on quite a few parameters as the demand environment for housing loans is strong across all segments, including affordable, mid-income and high-income.
The non-individual loan growth came at a lower 8 per cent during the quarter, and Mistry exuded confidence in double-digit growth in the segment for the fiscal year. At present, 79 per cent of the book comprises individual loans.
A spike in the dividend income at Rs 686.52 crore against Rs 16.40 crore in the year-ago period also helped the profit growth for the reporting quarter.
On the asset quality front, the company displayed significant improvements, with the gross non-performing loans ratio improving to 1.78 per cent, Mistry said.
About 0.77 per cent of the book is restructured under the various Covid dispensations of the RBI, and the lender is carrying provisions of over Rs 13,000 crore for any eventuality. The profit on the sale of investments came down to Rs 183.81 crore against Rs 263.02 crore in the year-ago period.
Mistry said the company is looking at raising up to USD 1.1 billion through the external commercial borrowing (ECB) route, to take advantage of the RBI’s liberalised stance allowing for borrowings of up to USD 1.5 billion under the automatic route.
The money raised from the ECB route will be deployed for on-lending to the affordable housing segment, Mistry said, adding that the landed cost for the money will be the same as borrowing from domestic sources. He said as the merger with its subsidiary HDFC Bank nears, the lender will look at elongating the borrowing maturities of its liabilities.
The company share closed 1.85 per cent up at Rs 2,379.10 apiece on the BSE on Friday, against gains of 1.25 per cent on benchmark Sensex.

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