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India's Largest Mortgage Lender Reports Profit Rises 12%

Housing Development Finance Corp., India’s largest mortgage lender, posted a 12 percent increase in third-quarter profit as loans grew 19 percent.

Net income climbed to 12.8 billion rupees ($207 million), or 8.14 rupees a share, in the three months ended Dec. 31 from 11.4 billion rupees, or 7.29 rupees, a year earlier, the Mumbai-based lender said in an exchange filing today. That compared with the 12.7 billion-rupee median of 32 analyst estimates compiled by Bloomberg.

Profit at the lender led by Chief Executive Officer Keki Mistry grew in the period as housing loans increased in a nation where mortgage penetration, or home loans as a portion of the country’s economy, is almost half of China. India’s mortgage market has “room for growth” as it forms only 8 percent of the economy, HDFC said in an investor presentation posted on its website in October.

“Strong loan growth, the management’s ability to protect lending margins and a low bad-loan ratio are helping profits,” Mangesh Kulkarni, a Mumbai-based banking analyst at Almondz Global Securities Ltd., said by phone today. “Retail loans are showing steady growth and are offsetting the slowing growth in loans to companies.”

HDFC stock rose 0.1 percent to 838.85 rupees at 1:33 p.m. in Mumbai. Shares of the mortgage financier lost 4.1 percent in 2013, outperforming a 9.4 percent drop by the S&P BSE Bankex index, which measures 12 bank stocks.

Bad Loans

The ratio of HDFC’s bad loans to total lending fell to 0.77 percent as of Dec. 31 from 0.79 percent at the end of September, according to today’s filing. India’s banks had a bad-loan ratio of 4.2 percent as of Sept. 30, the highest level in at least six years, central bank data show.

Loans at the lender grew to 1.9 trillion rupees in the 12 months to Dec. 31 from 1.6 trillion rupees a year earlier, the company reported.

The value of home loans to individuals expanded by 24 percent in the third quarter from a year earlier. HDFC is focusing on growing those loans, which accounted for more than 89 percent of total loan growth in the quarter, Mistry said in a televised media briefing today.

The value of Indian mortgages represents just 8 percent of the nation’s gross domestic product, compared with 15 percent in China and 76 percent in the U.S., according to HDFC’s October presentation.

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