Maintaining that “the asset quality of Can Fin Homes (the housing finance company promoted by Canara Bank) is steadily improving,” Girish Kousgi, Managing Director and CEO, adds that “gross NPA and net NPA stood at 0.80% and 0.59% at end-December 2019. The company has maintained stable asset quality, while lots of assets are under collection which will have a positive and significant impact on asset quality going ahead.

As on December 31, 2020 gross NPAs stood at Rs 141.93 crore as on 31st December 2020, as against Rs 149.90 crore as on 30th September 2020 and Rs 160.96 crore as on 31st December 2019. The ratio of gross NPAs to gross advances stood at 0.68% as against 0.72% as on 30th September 2020 and 0.8% as on 31st December 2019. The ratio of net NPAs to net advances stood at 0.41% as on 31st December 2020 as against 0.46% as on 30th September 2020 and 0.59% as on 31st December 2019. The company’s spread rose to 2.91% in Q3FY21 from 2.32% in Q3FY20.

Reviewing the performance of the company during the Q3 FY 2021, Mr Kousgi says, “The company’s profit before tax stood at Rs 177.48 crore in Q3FY21, rising nearly 22% from Rs 145.57 crore in Q3 FY20. Tax expenses grew 12% to Rs 45.39 crore.” The company’s net interest income rose 21% yoy to Rs 210.41 crore in Q3FY21 over Q3FY20. The Net interest margin improved to 3.97% in Q3FY21 from 3.43% in Q3 FY20.

According to Mr. Kousgi, the company offers housing loans to individuals, housing loans to builders/developers, and loans against property. Its loan portfolio includes housing loans and non-housing loans. Its housing loan products include individual home loans and various schemes related to the construction or purchasing of properties. Its non-housing loans include mortgage loans, loans against commercial property, site loans, personal loans, flexi-lap and commercial housing loans.

DEPOSIT SCHEMES

The company accepts deposits from the public, including fixed deposits and cumulative deposits. Under both types, it has a general scheme, a senior citizen scheme and a trust deposit scheme. Its deposits include a Fixed Deposit Scheme for Senior Citizens, a Cumulative Deposit Scheme for Senior Citizens, a CanFin Trust Fixed Deposit Scheme and a CanFin Trust Cumulative Deposit Scheme. It has approximately 170 branches/satellite offices distributed across over 19 states/Union territories of India.

According to Mr Kousgi, the loan book of the company has surpassed Rs 20,000 crore, rising 15% at end-December 2019 over December 2018 with a clientele base of 1.55 lakh. The entire loan growth of the company is organic, while refinancing of loans is also nil. About 70% of the loan book comes from the South with 25-26% from Karnataka, 19-20% from Andhra Pradesh and 13-14% from Tamil Nadu.

The company is focused on the home loan segment which contributed 94% of AUM, while LAP accounts for 5% and others for 1% of AUM. The company will maintain a steady loan mix going forward with a focus on tier 2 and 3 cities. The salaried segment accounts for 71% of AUM on an outstanding as well incremental basis with a focus on affordable home loans. About 75% of home loans is towards self construction and 25% is on apartments nearing completion. The loan ticket size remains stable, demand is slowing coming back but there is still a long way to go. The number of players has come down. The average ticket size of loans in the LAP and non-LAP books is the same, while the largest exposure in the LAP book is around Rs 40-50 lakh. The company expects 19-20% loan growth for the next two years, while it has no intention to grow faster, which may impact asset quality. Disbursements growth will continue at 20% for the next 4-5 quarters.

Low-Cost Funds

Pointing out that during the Q3 FY2021, the NIM shot up 3.97% as compared to 3.43% in Q32020, Mr Kousgi says, “The company has exhibited improvement in NIM to 3.42% from 3.31%, while it aims to maintain current level of NIM and spreads going forward.” He adds, “The yield of the company was steady, while spread improved to 2.32% with the decline in incremental cost of borrowings in Q3FY2020. The company is able to raise funds at a lower cost, which will have a positive impact on margins over the next 3-4 quarters. The incremental cost of funds has declined by 20-25 bps to 7.75% in Q3FY2020. The company has not reduced lending rates across the board, but has made cuts for some segments by 30-50 bps. The current lending rate is 8.75%.”