Bajaj Finance Q3 Results: Profit Beats Estimates Despite Higher Provisions

Bajaj Finance Ltd.’s quarterly profit beat estimates on higher fee and commission income. And that’s despite a rise in provisions.

Net profit rose 52 percent year-on-year to Rs 1,614 crore in quarter ended December, according to its exchange filing. That compares with the Rs 1,482-crore consensus estimate of analysts tracked by Bloomberg.

Net interest income, or core income, of the non-bank lender rose 42 percent to Rs 4,537 crore, compared with the Rs 3,994-crore estimate. Fees and commission income jumped 42 percent year-on-year to Rs 687.40 crore.

Bajaj Finance’s assets under management in the October-December period rose at its slowest pace in five quarters after it tightened lending norms earlier this fiscal. Its AUM grew 35.1 percent year-on-year to Rs 1.42 lakh crore in the third quarter.

Asset Quality

Bajaj Finance’s asset quality remained stable during the quarter. Its gross bad loan ratio remained unchanged at 1.61 percent compared to the previous quarter. The net non-performing assets ratio, however, rose to 0.71 percent from 0.65 percent in the quarter ended September.

But loan losses and provisions rose to Rs 831 crore from Rs 594 crore in the quarter ended September.

Consumer Demand

Categories such as electronics, mobile, and furniture faced a significant demand slowdown in the quarter gone by, according to Bajaj Finance’s investor presentation. But the demand in “consumption categories”, it said, saw some “uptick” since December and has continued in January so far.

“Republic day sale momentum was also strong. We, however, need to watch the incoming data for a little longer to have a definitive view on demand environment.”

That corroborates the remark of Sanjiv Bajaj, managing director at Bajaj Finserv Ltd.—parent of Bajaj Finance. Bajaj, on the sidelines of the World Economic Forum at Davos, had told BloombergQuint that the consumer lending business has “clearly reached the bottom” and there were early signs of some uptick in the first few weeks of January.

Bajaj Finance Q3 Results 2019-20: Other Highlights

• Total customer franchise rose 24 percent year-on-year to 40.38 million as of Dec. 31, 2019.
• AUM growth was granular for most lines of businesses.
• Cost of funds at consolidated level improved 9 basis points sequentially to 8.29 percent.
• The company saw its commercial paper borrowings go down from 8 percent to 2 percent in the second quarter due to large capital raise.
• Slippages rose to Rs 936 crore from Rs 786 crore in the September quarter.
• Bajaj Finance has made a part provision of Rs 85 crore for one of its loan against securities accounts. It will take a final call on the balance provision amount in the fourth quarter.

Shares of Bajaj Finance rose as much as 1 percent after the earnings announcement, compared with a 0.60 percent gain in the Nifty 50 Index.