HDFC Net profit to increase by 23% in Q1 due to increasing borrowing and steady margins
The resilient retail loan book expansion of HDFC is likely to drive overall profitability. Historically, the lender’s on-year loan growth has been in the 14-15 percent range.
Housing Development Finance Corporation Ltd (HDFC) is likely to report excellent loan growth and stable profitability for the June quarter, as well as pristine asset quality, later today.
According to an average of seven brokerage forecasts surveyed by Moneycontrol, the country’s largest housing finance firm is likely to report a net profit of Rs 3,902 crore, up 22.7 percent from the previous year, on the back of strong loan growth and stable margins.
Net interest income could increase by 15% year on year to Rs 4,701 crore for the June quarter.
HDFC’s resilient retail loan book growth is projected to improve overall profitability. Historically, the lender’s on-year loan growth rate has been in the 14-15 percent range.
To be sure, disbursal growth could be sluggish on a sequential basis, given that the lender’s fourth quarter of FY22 was exceptionally good. “Housing offtake has held up strongly in Q1 despite some seasonal slowdown following a good March.” Borrowers of affordable housing financing businesses are “firmly back on their business operations, driving off-take in an otherwise boring Q1,” according to a study by Kotak Institutional Equities.
According to experts, the company forecasts a solid increase in asset under management, and the non-individual loan book, which comprises of developer loans and lease rentals, may also revive. Motilal Oswal Financial Services Ltd forecasted 18 percent AUM growth for the quarter, owing to a recovery in non-individual growth and the robustness of the retail loan book.
Growth in the developer loan portfolio could also help the lender’s loan spreads and margins. However, a rise in the cost of capital could limit margin expansion. According to Edelweiss Securities analysts, margins will decline sequentially due to “a larger proportion of variable liabilities.”
HDFC’s net interest margin was 3.5 percent in the March quarter. “Limited increase in funding costs (majority funding from NCDs and Deposits) and lending rate hikes should assist achieve a near-stable spread/NIM,” Yes Securities analysts noted in a preview note.
HDFC’s asset quality is its strong suit, and the lender is projected to continue reporting stress reduction. Credit prices are likely to fall from last year. Gross bad loan rates could remain steady or perhaps increase somewhat year on year.