Bajaj Housing Finance posts 14% profit rise, margins under pressure

BENGALURU: Indian non-bank lender Bajaj Housing Finance reported a 14% rise in quarterly profit on Monday, as strong loan growth helped offset narrowing margins competition in the home-loan market intensifying.

Credit demand in India gained momentum in the second half of the fiscal year that ended in March, as easing inflation and lower taxes supported household spending and corporate borrowing.

Bajaj Housing Finance, India’s largest non-bank home loan financier by market value, has been expanding its reach into near-prime and affordable home loan segments to diversify its loan portfolio and increase penetration nationwide.

The company’s assets under management rose 23% year-on-year to 1.41 trillion rupees ($14.97 billion) for the quarter ended March 31, with loan disbursements also jumping 23% to 175.06 billion rupees.

Net interest income - the difference between interest earned and paid - fell to 9.45 billion rupees from 9.63 billion rupees in the preceding quarter, even as loan assets expanded 5.5% sequentially, underscoring the margin compression playing out across the housing finance sector.

The company’s portfolio yield - the weighted average return on the loan book - stood at 9.1% in the March quarter, down from 9.7% a year earlier, as competitive pressure from banks pushed home loan pricing lower.

Bajaj Housing posts higher profit on steady loan growth

The gross spread - the difference between the portfolio yield and the cost of funds, a key measure of lending profitability - narrowed to 3% from 3.2% in the preceding quarter, as lower rates are typically transmitted faster to lending rates than to borrowing costs.

Bajaj Housing Finance’s net interest margin slipped to 3.8% from 4% in the previous quarter.

Asset quality was largely stable, with gross bad loans as a percentage of total loans holding at 0.27% at the end of March, unchanged from three months earlier.

Profit rose to 6.69 billion rupees from 5.87 billion in the same quarter last year.

The firm’s lease rental discounting portfolio, backed by commercial rental income, emerged as the fastest-growing segment, surging 44% year-on-year and accounting for nearly one-fourth of total assets.