India's largest mortgage lender HDFC misses Q3 profit view on higher funding costs

A bird flies past a window of a HDFC Bank branch office in Mumbai
A bird flies past a window of a HDFC Bank branch office in Mumbai, India, October 21, 2015. HDFC Bank Ltd, India's second-largest private sector lender by assets, grew loans faster than expected in the second quarter as more people borrowed to buy cars and homes, making up for a slower pickup in big-ticket corporate credit. REUTERS/Shailesh Andrade

BENGALURU, Feb 2 (Reuters) - Housing Development Finance Corp (HDFC.NS) (HDFC), India's largest mortgage lender, reported a 13.2% rise in third-quarter profit on Thursday, missing estimates, as higher funding costs took the shine off strong housing loan growth.

Housing demand has remained strong in India despite a flurry of interest rates hikes last year, as a burgeoning rising middle class buys real estate. Increased funding costs, however, have compressed net interest margins and net interest income.

Profit rose to 36.91 billion rupees ($450.67 million) for the three months ended Dec. 31, compared to 32.61 billion rupees a year earlier, the company said in an exchange filing.

Analysts, on average, had expected a profit of 37.81 billion rupees, according to Refinitiv IBES data.

Total expenses rose 37.3% to 106.35 billion rupees, mainly driven by higher finance costs that surged 41%.

HDFC, set to merge with India's largest private lender HDFC Bank (HDBK.NS), said interest income climbed 30.8% to 144.58 billion rupees, while net interest margin for nine-months ended Dec. 31, stood at 3.5%.

Shares of the lender were largely steady after the results, trading 2% lower.

($1 = 81.9000 Indian rupees)

Reporting by Chris Thomas in Bengaluru; Editing by Janane Venkatraman

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