HDFC to follow RBI on rate hike

January 25, 2007: India's largest housing finance company, HDFC, will raise home loan rates if RBI ups rates in its January policy review, as is widely expected.

With banks across the board raising interest rates on deposits, HDFC is facing stiff competition in retail deposits. The institution offers 8.25% on one-year deposits against 8.3% offered by some nationalised banks like Union Bank of India (UBI).

Incidentally, less than a week ahead of the policy, four banks-ICICI, IDBI, UBI and Maharashtra Bank-raised interest rates on deposits.

According to HDFC chairman Deepak Parekh, while the institution’s costs of funds have risen, 3-4 rate hikes will ensure that the spreads are protected. “We try to protect our 2.1% spread. If RBI raises rates in its policy review on January 31, we will raise rates again,” he said. HDFC has hiked lending rates three times this fiscal.

HDFC on Wednesday reported a net profit of Rs 355 crore for the quarter ended December ’06, a 25% increase over Rs 284.5 crore posted in the corresponding period last year. Mr Parekh said the current growth in loan disbursements will be maintained despite the sharp surge in property prices. “Our focus is on smaller cities, where prices have risen but not as much as in the metros. Most of our loans are now in Thane, with loan sizes of Rs 12-14 lakh,” said Mr Parekh. He added that there are immense opportunities in second-tier cities like Baroda.

The HDFC scrip rose Rs 36, or 2.26%, to close at Rs 1,624.65 on BSE.

In a statement, the housing finance company said its loan approvals during the nine-month period ended December 31, 2006, aggregated to Rs 22,666 crore, compared to Rs 17,777 crore during the corresponding period of the previous year, representing a 28% increase. Disbursements during this period amounted to Rs 17,465 crore, compared to Rs 13,805 crore during the corresponding period of the previous year, a 27% increase.

Interest income rose 41% to Rs 1,358.4 crore from Rs 960.3 crore. However, interest expenses grew much faster at 48% to Rs 947.5 crore from Rs 639 crore last year.

 

Source: The Economic Times