Shares of Housing Development Finance Corporation (HDFC Ltd) hit a 52-week low at 2,321 rupees, down 4% from BSE in Monday’s intraday trading. By comparison, the S&P BSE Sensex was down 2.3% at 56,858 at 9:53 a.m.
Mortgage lender stock fell 11% in the past eight trading sessions after the company announced its December quarter (Q3FY22) results on Feb. 2, 2022. The stock fell below its previous low of 2 354.10 rupees reached on May 5, 2021.
In the third quarter of FY22, HDFC reported an 11% increase in net profit to Rs 3,261 crore, driven by higher revenue and lower than expected credit loss. The mortgage lender’s net interest income (NII) rose 7% to Rs 4,284 crore in Q3FY22 from Rs 4,005 crore a year ago and net interest margin, a measure of profitability, stood at 3.6%.
Asset quality improved slightly because the lender recognized some loans as non-performing, which were less than 90 days past due. The lender’s gross non-performing loans (NPLs) came in at 2.32%, up 32 basis points sequentially.
JP Morgan analysts view HDFC as a low risk play in the current environment. The company has excess capital and provisions to take care of any big hits in its developer book. Additionally, mortgage credit is one of the few sectors where we believe asset quality will hold up in the current environment, the brokerage said in the third-quarter earnings update.
Competition from the State Bank of India (SBI) and other public sector banks is likely to be intense, but HDFC has trade-offs available in terms of lower cost of funds, improved corporate pricing and better services. . “We believe the stock offers growth with reasonable value and should remain a staple Indian holding for long-term investors,” JP Morgan said.