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Market leader HDFC delivered a 1.2 per cent growth in net profit in the latest June quarter, a tad lower than expectations.
A delay in booking dividend income from HDFC Bank (in which HDFC holds 21.6 per cent stake) has impacted earnings. The income of ₹315 crore from dividend will be taken into account in the second quarter of 2015-16; the comparable income was ₹269 crore in the corresponding quarter last year.
But the larger issue is the slower pace of growth in loans in the last year or so. The housing finance space has grown at a healthy clip in the past, notwithstanding the overall sluggishness in the economy. HDFC, thanks to its leadership position, has been able to beat industry growth. But credit offtake has slowed in the last couple of quarters. From about 20 per cent two years ago, loan growth for HDFC has dipped to about 16 per cent in recent quarters.
In the latest June quarter, total loans grew 13.7 per cent, largely driven by the retail segment. This is lower than the 16 per cent year-on-year growth recorded by the lender in the previous quarter. The residential space has been a steady growth segment for HDFC. In the June quarter, its retail loans (pre-sale) grew 23 per cent. But this is lower than the 26-30 per cent growth levels seen two years back.
Competitive pressureLack of lending opportunities in the corporate space has seen most banks pursue the housing finance segment. Lower risk and delinquencies were an added attraction. Also, the RBI has given regulatory leeway to banks on raising bonds to fund affordable housing. This has increased the competitive pressure in this space. Growth in the high-margin non-retail segment continues to remain subdued at 9 per cent. Despite this, the company was able to maintain its spread on loans flat at 2.3 per cent.
HDFC continues to maintain a good asset quality. The gross non-performing assets in the June quarter stood at 0.69 per cent of loans — 0.54 per cent in the retail segment and 1 per cent in the non-retail segment.
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