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HDFC Q3 Net Up 10 Pct, Misses Forecasts

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HDFC, India's biggest mortgage lender, reported a 10 per cent rise in third-quarter net profit that fell short of market estimates as income from sales of investments fell sharply from a year earlier and interest expenses rose.

HDFC said net profit rose to Rs 980 crore from Rs 890 crore a year earlier. Total income rose to Rs 4470 crore from Rs 3320 crore.

Profit from the sale of investments fell 47 per cent, hurting net income.

HDFC had been expected to post a net profit of Rs 1040 crore, according to Thomson Reuters I/B/E/S.

Analysts expressed little concern about the headline numbers, noting the company's strong loan growth and asset quality, and the company's stock closed about 1 per cent higher.

"If you look at its loan growth, spread and asset quality, all these three broad parameters were in line with expectations," said Punit Srivastava, a banking analyst at Daiwa Securities Capital Markets in Mumbai.

Srivastava is a five-star rated analyst based on the accuracy of his earnings forecasts, according to Thomson Reuters' Starmine.

HDFC's operating profit, excluding gains from investment sales, rose by about a fifth to Rs 1240 crore. Its loan book increased 21 per cent to Rs 1320 crore as of December 31, slightly more than the 20 per cent the company had projected.

The spread of income from loans over the cost of borrowing was 2.3 per cent for the nine-months ended December, while the net interest margin, a key gauge of profitability, was 4.3 per cent.

"There could be some short-term pressure on the stock but there is nothing to worry about on a fundamental perspective. There is nothing alarming," said Manish Ostwal, an analyst at brokerage KR Choksey in Mumbai.

Ostwal, who has a buy rating on HDFC, said the numbers did not warrant a change in his recommendation, but he may downgrade earnings estimates to reflect margin pressures over the next two to three quarters.

Despite high interest rates, an economic slowdown and concerns about higher bad loans in the banking system, HDFC's asset quality has improved, Vice-chairman Keki Mistry said in a televised news conference.

"Every quarter of the last seven years, we have seen a decline in non-performing assets," he said.

Gross non-performing assets fell marginally to 0.82 per cent of the loan portfolio from 0.85 per cent a year earlier.

HDFC competes with India's top commercial bank, SBI, No. 2 ICICI Bank, and a host of other banks and financial institutions for a share of India's huge mortgage loan market.

Fifteen analysts tracking HDFC have a "buy" or a "strong buy" rating on the stock, while 17 rate it a "hold". Two analysts have a "sell" rating on the shares.

Shares of HDFC, which has a market capitalisation of about Rs 100,815 crore, ended 0.95 per cent higher at 687.4 rupees. The overall market fell 0.86 per cent.

(Reuters)


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