HDFC margins under pressure

HDFC Ltd the mortgage lender, recorded 23 per cent growth in year-on-year profits before tax at Rs1,265.88-crore during the March quarter, aided by higher spreads and profit on sale of investments. That’s against a 22 per cent y-o-y rise in profit before tax in the December quarter.

Profit on sale of investments amounted to Rs45-crore in the March quarter, compared with Rs1-crore in the year-ago period. Margins, however, are unlikely to remain so strong in the future.

The firm has been aiming to keep spreads within the 2.15-2.2 per cent range and the 2.31 per cent spread for 2009-12 was an aberration, a result of the fall in interest rates over the period.

Interest paid on loans and on bonds and debentures during the fourth quarter was substantially lower than during the year-ago period and the drop has been much more than the fall in interest earned on mortgages. But increased volume of mortgages should make up for lower spreads.

Loan approvals during the March quarter amounted to Rs19,501-crore, 27 per cent more than during the same period of 2008-09. Disbursements were up 36 per cent y-o-y.