India's largest mortgage lender Housing Development Finance Corporation (HDFC) on Tuesday met the market expectation in its first quarter (April-June) results. However, HDFC shares were nearly 1% down to close the day at Rs 677 on profit booking. Despite posting significant growth in its loan book, a section of market participants is a bit apprehensive of the retail asset quality in the coming quarters as the bug of economic slowdown continues to bite.
In a brief telephonic interview with moneycontrol.com the lender's vice-chairman and CEO - Keki Mistry sounded confident of its retail home loan portfolio and did not predict any asset quality stress, going forward.
Below is the edited excerpt of the interview:
Q: What was the key driver for HDFC's Q1 results?
A: A strong loan book growth coupled with a better asset quality added to our net profit. The non-performing asset ratios have improved year-on-year basis. However, the NPAs fell slightly quarter-on-quarter basis. You cannot compare the NPA levels sequentially. In March (Jan-March), NPAs hit historical low level. If you compare NPAs y-o-y basis, we have improved our asset quality n the last 30 consecutive quarters.
Q: What is your outlook for loan growth in FY13?
A: As I said earlier, our book would grow at 18-20%. The outlook for credit growth remains unchanged. Nothing has happened in the first quarter that would prompt us to change the outlook. In the last year too (FY12), we projected the same loan growth but we ended the year at 23%. We have always been above the industry average.
Q. With the economic slowdown hittinghard, do you foresee any stress coming from your retail assets?
A: I do not see any stress on our retail portfolio. The consumer behavior so far is very good. Our retail customers continue to repay their loans timely.
Q. During the quarter, retail loans showed higher growth. Will the trend continue?
A: It all depends how the economy turns out to be. However, the trend should continue in the rest of the year (FY13) given the current situation.
Q. Can you tell us about the composition of your loan book?
A: Loans to developers form 13% of our total loan book while 67% is from retail home loan customers. For the rest (20%), we give loans to companies to meet their own or their employees real estate requirements. We too disburse loans in the form of rental discounting, wherein we disburse fresh loans to companies against the rent receivables from their existing properties. This composition is likely to continue. So far in FY13, retail segment has shown higher growth representing 90% of the increase.
Q: What is your outlook for interest rates?
A: At this point of time, I do not see any case for interest rate cut. Our cost of borrowings remain unchanged (read at elevated level). In the coming few weeks, a lot of data is going to be released like IIP, inflation and so on. Unless those data give some positive indication coupled with a good monsoon, the Reserve Bank of India too will not take any relook in slashing policy rates.
Q: What is your projection for GDP growth?
A: It is a little early to talk about this. I think, we should cross 7% GDP for sure, unless there is a bad monsoon and the policy paralysis continues. GDP should be in the range of 7-7.50%.
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