HDFC Q4 Results: Profit Falls By More Than A Fifth As Provisions Spike
Signage for HDFC Ltd. is displayed in Mumbai, India. (Photographer: Adeel Halim/Bloomberg)

HDFC Q4 Results: Profit Falls By More Than A Fifth As Provisions Spike

Housing Development Finance Corporation Ltd.’s quarterly profit fell by more than a fifth as it set aside more money to account for Covid-19-related disruptions.

Net profit declined 22 percent over the previous year to Rs 2,232.5 crore in the quarter ended March, India’s largest mortgage lender said during a webcast on Monday. Analysts tracked by Bloomberg had expected the bottom line at Rs 2,715 crore.

Core net interest income, excluding rental fee and other income, rose 12.77 percent to Rs 3,540 crore. That compares with the Rs 4,539-crore forecast by Bloomberg.

The housing financier attributed the slump in profit to increased provisions.

As on March 31, HDFC’s provisions stood at Rs 10,988 crore—about Rs 6,800 crore above regulatory requirements. The company made an additional provisioning of Rs 5,913 crore in FY20, including Rs 1,274 crore in the fourth quarter.

About 26 percent of HDFC’s loan book has opted for moratorium on loan repayments. Individual loans under moratorium account for 21 percent of the portfolio.

HDFC Q4 Results: Key Highlights (YoY)

  • Gross NPA ratio at 1.99 percent vs 1.36 percent.
  • Total loan book grew 11 percent to Rs 4.5 lakh crore.
  • Net interest margin rose to 3.4 percent vs 3.3 percent.
  • Expected credit loss stood at Rs 1,274 crore.

In the March quarter, the company gained from sale of investments in subsidiaries or associate companies, amounting to over Rs 1.54 lakh crore.

HDFC’s financials for year ended March 31, 2020, aren’t strictly comparable to the previous year’s as the company made a profit of Rs 3,521 crore by selling its stake in Gruh Finance, Chief Executive Officer Keki Mistry said during the webcast. “On the amalgamation of Gruh in Bandhan, we have a fair value gain of Rs 9,020 crore.”

Asset Quality Amid Covid-19

According to Mistry, HDFC’s gross NPAs in the individual loan book grew to 0.95 percent in the year ended March 2020. He attributed that to a decline in physical collection during the lockdown period.

“A little over 4 percent of borrowers have to be physically contacted for collections, but due to the lockdown, it was not possible to do that,” Mistry said. “This meant that individual NPA numbers increased a little. Once normalcy comes back into the system, the individual NPA numbers will come back to levels we normally see.”

Gross NPAs in the non-individual segment surged 179 basis points quarter-on-quarter to 4.7 percent in the three months ended March 31. “We’ve downgraded two accounts to GNPA because we see some stress in them, even though they are not technically non-performing,” Mistry said.

Loan Book Dynamics

The lockdown hit HDFC at a time loan disbursals are traditionally high.

“Till March, we had robust growth, but in the second half of that month, when we normally sees high disbursements, growth was tepid and disbursements were low,” Mistry said. In the March quarter, HDFC sold loans worth Rs 5,479 crore. Rs 24,127 crore in loans were disbursed in the entire FY20.

The total loan book, excluding loan sell-downs, grew 11 percent to Rs 4.5 lakh crore in FY20. The total outstanding loan book stood at Rs 5.16 lakh crore.

Break-Up Of Loan Book In FY20

  • Individual loans: 76 percent
  • Corporate loans: 5 percent
  • Construction finance: 11 percent
  • Lease rental discounting: 8 percent

Affordable housing loans accounted for 18 percent of loans disbursed in value terms and 36 percent in volume terms.

“Our focus has been on growing the individual book, so the split for the whole year was 89 percent individual loans and 11 percent non-individual loans,” Mistry said. “We have neither seen an increase or decrease in the average loan amount.”

HDFC’s Investments

The non-bank lender completed the acquisition of Apollo Hospitals Group’s stake in Apollo Munich Health Insurance during the March quarter. HDFC acquired 51.16 percent stake for Rs 1,495 crore.

Subsequent to this acquisition, Apollo Munich Health Insurance was renamed as HDFC ERGO Health Insurance and it became a wholly-owned subsidiary of HDFC. It was subsequently merged with HDFC ERGO through a share-swap deal.

The home loans provider also invested a sum of Rs 200 crore in Yes Bank Ltd. as part of a rescue plan led by State Bank of India.

Stock Performance

During the January-March period, shares of HDFC fell 32.3 percent—the stock’s worst-ever quarterly performance. That compares with a 29.3 percent decline in the NSE Nifty 50 index. Shares of the company ended 5.1 percent lower on Friday on the National Stock Exchange.

HDFC Q4 Results: Profit Falls By More Than A Fifth As Provisions Spike
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