Small Housing Finance Firms Rally As Banks Cut Lending Rates

Posted by Anurag Mishra on January 6th, 2017

Frontline banks and financial institutions fell, while smaller housing finance companies rallied after leading government-owned banks cut lending rates.

State Bank of India dropped as much as 3 percent after it announced up to 90 basis points reduction in lending rates. Punjab National Bank and Union Bank of India also fell after announcing rate cuts on the weekend.

“Considering low return on assets, every decline in margins is significantly negative for public sector banks,” Motilal Oswal said in a report. A five basis point decline in net interest margin will impact profits of government-owned banks by up to 5 percent, compared to 1-2 percent for private banks, the brokerage added.

The bigger non-banking financial companies also took a hit in Monday’s trading, with HDFC Ltd. dropping as around 3.5 percent, and LIC Housing Finance Ltd. dropping over 5 percent.

Housing finance companies competing directly with banks could face margin pressure as they will also be forced to cut rates given the heightened competitive intensity in mortgage loans. “For NBFCs - HDFC, LIC Housing Finance - this was the ultimate fear, as an aggressive SBI and rate war would be negative for both growth and net interest margins,” Deutsche Bank analyst Manish Karwa wrote in a note to clients.

Meanwhile, smaller housing finance companies like India bulls Housing Finance Ltd., Gruh Finance Ltd., Can Find Homes Ltd. and Repco Home Finance Ltd. rallied up to 10 percent each.

“Small ticket housing finance companies have pricing power on the asset side, they have been able to maintain their spreads better than large housing finance companies,” Digant Haria, an analyst at Antique Institutional Equities wrote in a note to clients.

{Source: http://www.bloombergquint.com/markets/2017/01/02/small-housing-finance-firms-rally-as-banks-cut-lending-rates}

Anurag Mishra

About the Author

Anurag Mishra
Joined: December 13th, 2016
Articles Posted: 108

Exchange crypto online - Cryptocurrency exchange platform Changelly
Changelly.com is the best instant cryptocurrency exchange platform with the best exchange rates for BTC, ETH, LTC, XRP, ADA and 140+ other cryptocurrencies. You can buy bitcoin and other cryptocurrencies with a credit card or any crypto wallet
Betting Code Cracked
At betting code cracked we make money by cracking codes and playing them at their own game. Be that winning local poker games, picking high odds bets at the bookies or clearing out world-famous casinos. Weve beaten them all and made a small fortune and
Nitsova Cashflow Management & Budgeting Web App
Online Personal Finance Software. Cashflow Tracking and Budget Planning.
Jimmy Chappel
I set maximum commissions for ALL my products. (That includes the entire sales funnel.) So you receive 75% on every sale you make. Plus, my refund rates are practically non-existent! […]
BTV Professional Music Production Software
You can arrange full songs with just your computer keyboard. You dont need any other controllers, any other drums, or any other virtual instruments. You can sequence, have your sound banks and you can also mix here. Its everything you need to get sta
CoinPayU
Earn Bitcoin by viewing advertisements and completing offers.