Indian non-bank lender HDB’s quarterly profit jumps on better margin, asset quality

Indian non-bank lender HDB Financial Services reported a 41.4% rise in fourth-quarter profit on Wednesday, driven by margin expansion, improving asset quality and growth in its consumer finance portfolio.

Net profit rose to 7.51 billion Indian rupees ($80.40 million) for the quarter ended March 31, from 5.31 billion Indian rupees a year earlier.

Indian lenders saw a pick-up in loan growth after October, aided by consumption tax cuts that boosted spending, particularly on vehicles and consumer durables. HDB Financial’s consumer finance loans grew around 16%, outpacing both enterprise lending, which grew nearly 8%, and asset finance, which grew close to 11% over the same period, according to a Reuters calculation.

HDB Financial, a unit of HDFC Bank, said its assets under management rose 10.7% year-on-year to 1.19 trillion rupees, while net interest income - the difference between interest earned and paid - increased 21.6% to 23.99 billion rupees.

India’s HDB Financial posts higher profit on strong credit demand

The lender’s net interest margin expanded to 8.23% from 8.09% in the previous quarter and 7.55% in the year ago period, as its cost of borrowing declined.

The company, which had grappled with elevated bad loans in the first half of the fiscal year, has started to see improvement following a more cautious approach to lending in stressed segments including unsecured business loans, commercial vehicles, and construction equipment.

Gross stage 3 loans - those overdue by more than 90 days -stood at 2.44% of total loans at the end of March, down from 2.81% at December-end.

Loan losses and provisions rose 8% year-on-year but fell 3.9% sequentially to 6.85 billion rupees, supporting overall profitability.