- Q3 FY 2017 is a perfect new year beginning for the company.Growth in outstanding Loan book is 28.2%
- Revenues are gone up by 26%. Exp are around 20%. NII Grew 39% for the Quarter.PAT grew 41%
- Fresh Sanctions are up by 43%. Disbursements are up by 31%
- Impact of demo was not that much, except for in November
- Lowering of cost of borrowing 9.1% Dec 2015 to 8.48% in Ded 2016
- Spread has improved by 40 bps. 2.12 to 2.52
- NIM stands at 3.5%
- Per Branch business is stretching up to 100 crore per branch.
- Cost to Income ratio has reduced by 180 bps. From 19% to 17.15%.
- Priority is still on the salaried class. It constitutes 77% of the total loan portfolio
- Of the Portfolio, 88% is housing and 12% is non-housing
- For Canfin, the collections are done by banking medium so demonetisation has not affected much.
- CP is 19% of the total borrowings.
- Net slippage is Rs. 31 Lakh for the Quarter on entire loan book
- Gross NPA 0.24% vs 0.27% last year and Net NPA 0.01 vs 0.04% last year
- PCR is 94%
- CAR -18.76. Asset Quality has been good.
- LTV in LAP Book is below 50%.Balance transfer cases are more in higher risk profile borrowers
- Majority of the customers are long standing customers.
- Current year 9 Months slippage is less than QlFY 16. So, asset Quality is getting maintained
- Last year there was a writ e-off of 3 Cr. This year, there is no write -off
Marginal cost of funds
- Cost of Funds is 8.48%. Yield on advances is 11%
- Banking portfolio is now repriced at a lower rate and the NCO is dependent on money market
- Rates Cut will be passed on. Broadly, Margins are expected to be maintained
- Things are improving on customer addition front
- Average Ticket size is 18-20 Lakhs and LTV is 70%
- Incremental age of borrowers is 40-41 years. This means that this could be the first house of the borrower and so the delinquency rates are lower.
Benefit of Interest Subvention Scheme of the government
- Average Ticket size in Metro cities is 30-35 Lakhs.
- Average ticket size in non metro cities is 10 -15 Lakhs. This Segmentis roughly more than 50% of the total. This segment will benefit from Govt. Scheme
- Overall the subvention is a very positive move.
Prepayment trends due to competition
- Company has a loyal base of customers
- Even though Canfin is offering loans at higher rates compared to bank, still customers are there
- This difference between lending rates has always been there. But Co. stays competitive and passes on the benefit as and when possible
- Existing customers can avail of new (lower ) rate by paying interest differential amount, which is 15000 or 0.5%, whichever is lower
- Prepayment rates on Housing loans is less than 17%
- Rate cut of 75 Bps is for new sanctions
- The company feels that it is insulated from sharp rate cuts by banks. Even earlier, Canfin used to charge 40-50 Bps above the banks. And now the rates are even more competitive due to rate cut. So there is no customer behaviour change
- Repricing of loans from banks has been done, but high cost NCDs continue
- Fee income and other income declined
- When a rate cut happens in a Quarter, to compensate the interest differential, other income increases. Similar ly when there is no cut, other income remains normal
- Also in this Quarter, there was festive offer.
- By the same logic, Q4 may see a jump in other income
- Growth should be better from now as rate has been cut. Rate cut matters to low income salaried class
- During November, there was a dip in growth, but enquiries have improved
- No branch additions planned for this year, but satellite centres will be converted
Sourcing and Borrowing Mix
- Direct and DSA (Direct Selling agents) both account for 50:50
- But Incrementally, Direct is expected to improve to 55%
- In Metros, DSA contribution is higher at 50-60%
- Commission is 0.35% for housing 0.5% for non housing
- Borrowing mix - 50% is from banking and NHB, and 48% from money market
- Geo graphical mix - 74% South. Karnataka is 46%, TN is 16%, Telengana is 18% and Kerela is 2.5%. 20% is from NCR and some from Gujarat
Disbursements and Yield
- Compared to December-16, there is a growth rate of 25% in disbursements
- The company follows Risk based pricing. The lowest risk category borrowers get best pricing
- Avg.Yield for 9 months is 9.75% for Home loans and 13.5% for non home loans
- Conversion of loans or re-pricing generally takes time
- The company has not reduced rates in Dec. Quarter. Now it is reducing 25 bps for the housing segment.
- Rural housing is 12% of the loan book
- As of now there is less supply in housing sector and with government also providing benefits to developers in this segment, supply is expected to pick up
- The company does not finance where the project is not ready
- Average age of employees is 32-33
- Average age of Incremental borrowers is 40-41. Average age of Top management is 50
- Incremental Borrowing cost will be lower . It stands at 8.48% vs 8.75% in March. And for companies like Canfin, where there is no casa deposit, it will help
- The Company continues to have a guidance of 13500 Cr Loan book For FY 2017
- Q4 and the coming year is expected to be better for generally all the housing finance companies
- Satellite branches are converted to loan centres. Co. will add 10 more each quarter.