HDFC Bank net rises 45% on interest income

The country’s second largest private sector lender HDFC Bank on Monday announced a 44.55 per cent jump in its net profit at Rs 464.35 crore for the quarter ended June 30, 2008, as against Rs 321.23 crore during April-June last year. The bank’s total income for the quarter rose 59.6 per cent to Rs 4,215.2 crore from Rs 2,641.7 crore in the first quarter of 2007-08.

HDFC Bank, which merged Centurion Bank of Punjab in May this year, reported a dip in its net interest margin (NIM) to about 4.1 per cent at the end of the June 2008 quarter, compared with 4.4 per cent in the corresponding period last year. The bank said the reduction in NIM was a result of the merger with CBoP, that recorded an NIM of 3.6 per cent.

“We have been able to pass on the increasing interest rates to our loan book, and if the rates go up further, we may not see our margins under pressure. Our NIM is likely to be in the range of 3.9 per cent and 4.2 per cent for the coming 14-15 months,” said the bank’s executive director Paresh Sukhtankar.

The net interest income rose to Rs 1,723.5 crore in the first quarter, registering a growth of 74.9 per cent on a year-on-year basis.

HDFC Bank reported a 12 per cent rise in provisions at Rs 344.5 crore during the quarter, as against Rs 307.12 crore during April-June last year. During the first quarter this year, the bank made a provisioning of Rs 324.4 crore towards non-performing assets (NPAs) and standard assets, compared with Rs 299.7 crore in the corresponding period last year.

During the quarter, the bank took a mark-to-market (MTM) hit of about Rs 72 crore on its investment portfolio. “About 80 per cent of our assets are in the held-to-maturity (HTM) category and the remaining are in available for sale (AFS). Therefore, the MTM numbers might not go up significantly from these levels unless the central bank makes a huge hike in policy rates,” Sukhtankar said.

The bank earned Rs 2,636.38 crore from interest on advances during the first quarter, about 81 per cent higher from Rs 1,453.62 crore for the same period last year.

Iran's c.bank sees no need to change rial rate policy

Iran's central bank sees no need to change the country's managed floating exchange rate policy, media reported on Monday, after a minister said the government was studying strengthening the rial against the dollar.

The remarks by Governor Tahmasb Mazaheri suggest another policy rift between the central bank and government, already at odds over interest rates. Rates were kept steady this month well below inflation, despite the bank's call for raising them.

Acting Economy Minister Hossein Samsami said in comments published on Sunday Iran was considering strengthening the rial against the dollar, possibly to a rate of about 4,500 rials to the greenback compared with the current level of 9,211 rials.

Central Bank Governor Tahmasb Mazaheri said the existing exchange rate system was working well.

"The rate for foreign exchange has enjoyed relative stability in recent years and has contributed to market stability," he said in comments carried by the economic daily Donya-ye Eqtesad.

"Iran's foreign exchange rate system has been managed on a floating basis, in which the interests of groups such as exporters and manufacturers are taken into consideration, and one must not unreasonably disrupt the stability of this market," the newspaper quoted the governor as telling reporters.

Asked about the idea of strengthening the rial to around 4,500 rials to the dollar, the governor said: "This rate pertains to years ago, and the determination of the dollar rate under the present conditions would require extensive studies."

Differences between Mazaheri and the government have become increasingly public. The evening edition of a leading newspaper was shut last week on the grounds that it had harmed the economy by reporting a row between ministers and the governor.

Mazaheri has been calling for higher interest rates to tackle inflation, now running at about 26 percent, but has run into opposition from ministers who say this would hurt job creation and stifle investment.

Interest rates were kept at 12 percent for the year 2008-09, media reported on Saturday. Although not the rate rise Mazaheri sought, one analyst said it was a relative success that he had managed to block the president's previous calls to lower rates.

Economists say rates need to rise sharply and the government must rein in spending of petrodollars if prices rises are to be brought under control.

The last central bank governor quit last year, also following differences with the president over rate policy.

Ahmadinejad, whose government is under Western pressure over Iran's disputed nuclear programme, has blamed rising inflation on factors including Iran's dependence on imports, the dollar's global weakness and plots by the Islamic Republic's enemies.

The rial exchange rate has stayed relatively stable against the dollar, tending to hover around 9,200 rials or so, although it has weakened against the euro in line with the greenback.

Some of Iran's biggest trading partners are European, making those imports more expensive and feeding into inflation.

Mazaheri was quoted as saying that only 3 percentage points of Iran's inflation rate was being imported.

(Reporting by Hashem Kalantari and Edmund Blair; Editing by Ruth Pitchford)

The home loans interest rate story: The wait for the fall

Since 2004, India has been in a booming economy. The retail and housing sector has seen the most of these good times. The property rates and demand for houses has always been high, keeping the brokers and the banks very happy. The banks have responded to the increase in the demand for home loans by increasing home loan interest rates. This did have an effect on the home loan borrowers in the recent past, but the booming economy had also lead to an increase in the economic activity, and hence their incomes.

However, the past some months has seen a complete reversal in trends. The inflation rate of 11.63 percent and the corresponding stringent monetary rules by the Reserve Bank of India have left many borrowers seeing their financial burden increased by as much as 25%.

On 24th June, the RBI had hiked the repo rate and the cash reserve ratio by 50 basis points each. Repo rate is the rate which the RBI charges the banks, hence, in a way; a higher interest rate makes it costlier for banks to borrow money from the central bank. Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down.

This article outlines the precautions existing home buyers should take. It also tries to answer the queries which appear on the mind of every individual who wishes to buy home loans.