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HDFC Ltd (updated - 21 Jan 2010)
HDFC sailed through the quarter on the back of liquidityflush environment and a strong return of the retail mortgage borrower.

HDFC’s net interest income (interest earned minus expended) was up 9 per cent year-on-year to Rs 854.4 crore as its average cost of funds dipped to 8.7 per cent for the first nine months ended December 2009, from 9.07 per cent in the six months to September 2009.

Yield on assets, however, dipped to a shade under 11 per cent from 11.27 per cent in the corresponding period of last year.

The spread for the December 2009 quarter was over 2.29 per cent, four basis points higher than the 2.25 per cent between April and September and a touch above its full-year target of 2.15–2.2 per cent.

“Business is coming in,” said Senior General Manager Conrad D’souza, adding that retail was the big driver, having grown 65 per cent year-on-year in the December quarter. Also, in the non-retail business, developers refocused on residential development. This is in contrast to the trend seen a year-and-a-half ago when commercial and retail properties like malls were the ones that created the buzz.

HDFC’s loan approvals were up 31 per cent yearon-year to Rs 12,692 crore during the quarter whereas year-to-date approvals grew nearly 22 per cent to Rs 33,820 crore. However, there was a sequential dip (down 20 per cent compared to the September 2009 quarter), partly ascribed to seasonal trends, as second and fourth are generally considered stronger quarters.

Disbursements have been slower. The December quarter showed a 19 per cent year-on-year growth compared to nearly 30 per cent rise in the September 2009 quarter. The management puts this down to seasonality and the lag factor in disbursements, pointing out that disbursements are rising from their trough levels. Stating that this retail burst was not sustainable, D’souza said the company was well on track to achieve the 20 per cent loan growth target for 2009-10. HDFC’s fee-income doubled to Rs 48 crore, which together with Rs 51-crore profit from sale of investments helped non-interest income jump 60 per cent. Like in the earlier quarters, HDFC was able to control operating expenses, which put together helped push up operating profit 22.6 per cent.

The quality of its book continues to be healthy with gross non-performing loans (NPL) at 0.94 per cent of the portfolio, lower by seven basis points year-on-year and one basis point sequentially. Contingency provisions at about Rs 684 crore (about 0.75 per cent of the portfolio) left net NPLs at 0.19 per cent. On the liability side, the company has increased the share of deposits (half of incremental borrowing) by about 200 basis points to 25 per cent in anticipation of a possible rise in interest rates and cost of funds. It has locked in funds at an effective cost of 6.1 per cent as it recently launched a dual-rate product (target book of Rs 3,500-4000 crore), which has a two-year fixed-rate of 8.45 per cent, maintaining its spread.

Considering unrealised gains of Rs 14,185 crore on listed investments, HDFC has estimated its book value at about Rs 1,034 per share. The stock closed higher by 0.55 per cent to Rs 2,524.
source - BS

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