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
HDFC Ltd (updated - 01 April 2010)
HDFC plans to unlock value from non-core unlisted investments by first shifting them into a special purpose vehicle and then attracting private-equity type investments over the next few quarters, milking the current upbeat market environment.
The proceeds from this and a potential listing of its life insurance subsidiary in the next financial year might be used to fund its education finance business or increase dividend payouts, according to the management. The exact plan and the timeline haven’t been finalised as yet.
The total book value (cost of investment) of its noncore investments added to about Rs 363.5 crore as of March 2009. The key holdings are a 13 per cent stake in IL&FS at a book value of Rs 94.7 crore and a 5 per cent stake in Lafarge cement worth Rs 50 crore.
An HSBC report pegs the current market value of these investments as between 1-6x of book value. The report says areasonable estimate will peg the value of these investments at about 5x book value, or about Rs 1,800 crore, translating into unrealised gains of about Rs 1,454 crore, about 9per cent of FY11 book value estimates and 2 per cent of the market cap.
A Kotak report estimates the value of HDFC Standard Life at about Rs 11,300 crore, with HDFC’s 72 per cent stake coming to just over Rs 8,000 crore. The 60 per cent stake in HDFC Standard Mutual Fund is valued at Rs 2,850 crore.
Analysts estimate that the unrealised gains contribute about Rs 50 to the target price. The net impact on the stock’s current market price is expected to be negligible, given that most of the potential gain is factored in the fair value estimates. The stock surged 2.8 per cent on March 31 to Rs 2,713 and trades at a P/E valuation of about 24.4x consensus analysts FY11 earnings per share estimates.
Source - Business Standard
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.
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Loan growth fell 17 per cent during the first quarter of FY11 (without adjusting for loan selldowns to HDFC Bank), compared to initial estimates of 18 per cent. The stock came under some selling pressure and lost one per cent a day after the results were announced. On the brighter side, the undertone of the business remained strong. HDFC, with its attractive special home loan schemes, saw disbursements to individual borrowers grow 62 per cent year-on-year. Individual loan sanctions also rose 56 per cent during the period. But, overall disbursements grew only 25 per cent, as HDFC managed to slow down the corporate loan book in favour of retail.
The continuation of the special home loan scheme, under which customers are charged a fixed rate of 8.25 per cent initially, may ensure disbursement growth of 2225 per cent in 2010-11. The mortgage lender also improved the spreads on loans by 11 basis points (bps) in the June quarter to 2.34 per cent compared to the yearago period. Net interest margins improved 30 bps to 3.3 per cent. However, they declined 110 bps sequentially, as yields on advances fell 85 bps and cost of funds inched up 30 bps.
Housing Development Finance Corporation (updated - 16 July 2010)
HDFC, the largest private mortgage lender in the country, just managed to meet expectations with its June quarter results. The stock has been outperforming the Bankex and the broader indices since last month and has been trading at relatively premium valuations. But, results put a brake on the rally.
The asset quality remained strong, with net nonperforming loans at 0.58 per cent. HDFC reported a 23 per cent rise in net profit during the quarter. But, for a onetime gain during the year-ago quarter, profit growth would have been 32 per cent in the period under review.
While the company keeps chugging along with its steady performance, analysts consider value unlocking in the insurance business to be the real trigger.
source - business standard
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