HDFC Q1 profit up 22% to ₹3,669 cr on high individual loans

House finance major HDFC Ltd has reported 22% year-on-year growth in standalone profit for the quarter ending June 30, 2022, at ₹3,669 crore on growth in individual disbursements, stable margins and an increase in AUMs. The company's consolidated profit for the quarter ended June 30, 2022, stood at ₹5,574 crore.

Reacting to the news, the share of the private housing loan giant closed 2.2% or 51.45 points up at ₹2,389. The stock touched day's low at ₹2,343.10 and saw a sharp rise after the earnings were announced, to close at ₹2,389. The stock has risen 10.05% in past month but is down 9.38% in the year-to-date period.

HDFC’s net interest income (NII) for the quarter ended June 30, 2022, saw marginal growth at ₹4,447 crore compared to ₹4,125 crore in the previous year. The company says in Q1 FY23, interest rate actions have had an “immediate impact” on borrowing costs, without a simultaneous transmission on the asset side.

The average size of individual loans during Q1 stood at ₹35.7 lakh compared to ₹33.1 lakh in FY22. As of June 30, 2022, HDFC’s assets under management (AUMs) stood at ₹6,71,364 crore against ₹5,74,136 crore in the previous year; individual loans comprise 79% of the AUMs.

"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," says HDFC.

HDFC’s gross non-performing loans were ₹10,288 crore in the quarter, around 1.78% of the portfolio. It says its gross individual non-performing loans (NPLs) in the quarter were 0.98% of the individual portfolio, while the gross non-performing non-individual loans were 4.44% of the non-individual portfolio.

HDFC also carried a total provision of ₹13,328 crore in the quarter.

HDFC’s NIM during the quarter was 3.4%. The company says 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 NII and net interest margin (NIM).

The spread on loans over the cost of borrowings for the quarter was 2.25%, the spread on the individual loan book was 1.91% and on the non-individual book was 3.45%.

The company says it has increased its benchmark lending rates. It has incrementally shifted from a quarterly reset for individual loans to a monthly reset to reduce the impact of transmission of rate changes, it adds.

HDFC's cost-to-income ratio stood at 9.5% for the period. The capital adequacy ratio was 21.9%, of which Tier I capital was 21.4% and Tier II capital was 0.5%, higher than the minimum requirement of 15% and 10%, respectively.