Daily Archives: January 2, 2014

CARE Research – Quarterly update on Indian Housing Finance Industry Dec 2013

CARE Research has released 2QFY14 Result Review update in December 2013 on Indian Housing Finance Industry – “Despite spread compression, loan growth remains buoyant”
Key takeaways include:
  • As per NHB Residex, property prices in 12 out of 26 Indian cities witnessed northward trend sequentially (in range of 0.46% to 5.3%) in 2QFY14 with Kolkata reporting highest appreciation of 5.3%. However, 10 cities recorded contraction in property prices qoq, with Meerut observing the highest fall of 6.8% followed by Delhi 4.53%
  • Amid weak macro-economic and elevated interest rate/inflationary scenario, the o/s loan book of HFCs’ universe analyzed by CARE Research grew by 23% in 2QFY14 (yoy) v/s. 21% in 2QFY13 on 1) improving affordability despite rising property prices, and 2) continued focus towards tier II/III/IV cities and 3) huge mortgage penetration gap (~9% as on FY13)
  • CARE Research observes that average gross NPA level of the universe analyzed reduced by 5 bps to 0.67% in 2QFY14 sequentially on account of 1) continued better asset selection, and 2) robust recovery mechanism under SARFEASI act 2002
  • The Net Interest Margin (NIM) of the HFC universe analyzed, declined to 2.39% in 2QFY14 v/s. 2.44% in 1QFY14 on 1) elevated pricing competition from banks, 2) increased cost of fund and 3) stress on project/builder loan portfolios. However, CARE Research estimates NIM to witness improvement in FY15e on stabilized cost of fund led by falling wholesale rate & borrowing via ECB route
  • The total income growth of HFC universe analyzed, moderated to 18.7% in 2QFY14 v/s. 19.2% in 1QFY14 led by 1) low interest income (on suppressed spreads) and 2)  fall (-13.1%) in other operating income segment
  • The Profit After Tax (PAT) of the HFC universe analyzed grew by 15.4% in 2QFY14 v/s. 22.7% in 1QFY14 due to 1) increased interest expenses (grew by 20% yoy) & other cost (grew by 18% yoy) and 2) contained interest income(grew by 18.7% yoy) & fall in other operational income (-13.1% yoy)