HDFC Q2 Results: Net Profit Drops 28%, NII Rises 21%; Shares Surge
Information leaflets are displayed at a Housing Development Finance Corp. (HDFC) bank branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

HDFC Q2 Results: Net Profit Drops 28%, NII Rises 21%; Shares Surge

Housing Development Finance Corp. Ltd.’s earnings declined in the quarter ended September on account of lower revenue and a one-time gain a year earlier.

Net profit fell 27.5% year-on-year to Rs 2,870 crore in the July-September period, the mortgage lender said in an exchange filing. That compares with the Rs 2,313-crore consensus estimate of the analysts tracked by Bloomberg. The company’s earnings also fell from the Rs 3,052-crore reported in the April-June quarter.

The lender, in the July-September 2019 period, had booked a profit on sale of its stake in Gruh Finance Ltd. to Bandhan Bank Ltd.

Adjusting for the sale of investments and dividend income received last year, the housing finance company’s net profit would have been 27% higher year-on-year, Keki Mistry, vice chairman and managing director, said during a media interaction.

HDFC’s net interest income, however, rose 21% year-on-year to Rs 3,647 crore. Total revenue from operations fell 13% to Rs 11,728 crore, largely owing to a loss of Rs 61 lakh on sale of investments in the reported quarter compared with a profit of Rs 1,627 crore a year ago.

Total advances for the home financier rose 10% from a year ago to Rs 5.4 lakh crore. On an assets under management basis, growth in the individual loan book was 9%. Growth in the non-individual loan book stood at 13%.

In the April-June period, HDFC had said its retail lending business was impacted by the national lockdown implemented to curb the Covid-19 pandemic. But the company has seen a considerable recovery in September and October.

“During the quarter ended Sept. 30, 2020, individual loan application receipts grew 12% and approvals grew 9% compared to the corresponding quarter of the previous year. Individual disbursements during the quarter were at 95% levels of the previous year,” HDFC said.

On a quarter-on-quarter basis, the lender extended mostly individual loans while the non-individual book contracted, Mistry said after releasing the company’s quarterly results. Disbursements in October, according to Mistry, were the second highest in HDFC’s history, indicating strong appetite for housing loans.

HDFC’s gross bad loan ratio fell 6 basis points from June 30 to 1.81% in the second quarter. Accounting for the Supreme Court’s instructions on asset classification, the total gross NPA ratio would be at 1.83%, it said. Total provisions as on Sept. 30 stood at Rs 12,304 crore, HDFC said.

The company reported loans worth Rs 7,977 crore that received the asset classification benefit extended by the Reserve Bank of India in March. Adding this to the 1.83% gross NPA, the total pool of stressed assets for HDFC would be at 3.3%.

The home financier’s collection efficiency, however, improved to 96.3% since the moratorium was lifted on Aug. 31. It continues to hold provisions in excess of regulatory requirements, Mistry said.

While restructuring requests have been low so far, HDFC will wait till December to see if there is any rise. But the company doesn’t expect too many of its borrowers to seek deferments in repayment, Mistry said. The RBI, on Aug. 6, allowed lenders to defer loan repayments by two years as part of a one-time restructuring scheme, owing to Covid-19.

Shares of HDFC rose as much as 7% after the quarterly results were announced but closed 5% higher on the NSE. That compares with a 0.23% gain in Nifty 50.

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