Housing Development Finance Corporation Ltd. (HDFC) reported second-quarter net profit fell 28% to ₹2,870 crore, from ₹3,962 crore in the year-earlier period when dividend income and profit on sale of investments had been significantly higher.
“The profit numbers are not directly comparable with that of the previous year,” said vice chairman and CEO Keki Mistry. “To facilitate a like-for-like comparison, after adjusting dividend, profit on sale of investments, fair value adjustments, net gains on loans assigned, charge for employee stock options and provisioning, the adjusted profit before tax for the quarter ended September 30 is ₹3,366 crore compared with ₹2,646 crore in the previous year, reflecting a growth of 27%,” he added.
During the quarter, HDFC had dividend income and profit on sale of investments of ₹323 crore, compared with ₹2,701 crore in the year- earlier period.
Net gains on loans stood at ₹159 crore, compared with ₹264 crore. Similarly, the charge for employee stock options was ₹46 crore, compared with ₹4 crore.
While there had been ‘significant improvement’ in business on a month-on-month basis, given the circumstances of the pandemic, the current and previous year’s numbers are not directly comparable, HDFC said.
Net interest income rose 21% to ₹3,647 crore. Net interest margin stood at 3.3%. At the end of the quarter, unaccounted gains on listed investments in subsidiary and associate companies amounted to ₹1,96,344 crore.
‘Gain momentum’
Stating that traction in individual loans had gained momentum with successive month-on-month improvements, Mr. Mistry said low interest rates, softer property prices, reduction in stamp duty in certain States and inherent strong demand would benefit the housing finance sector.
During the quarter, individual loan application receipts grew 12% and approvals grew by 9% compared to the corresponding quarter of the previous year.
Individual disbursements for the quarter ended September 30 were at 95% of levels seen a year earlier.
“The months of September and October 2020 have seen the strongest recovery since the outbreak of the pandemic. Disbursements in October were the second highest in HDFC’s history,” he said.
He said based on the average level for the third quarter in the previous year, growth in October 2020 over the previous year Approvals were 32% higher and disbursements were up 22%.
“These trends are indicative that business is reverting to pre-COVID levels,” he added.
As at September 30, 2020, assets under management stood at ₹5,40,270 crore as against ₹4,90,072 crore in the previous year.
Individual loans comprised 75% of the Assets Under Management (AUM).
On an AUM basis, the growth in the individual loan book was 9%. The growth in the non-individual loan book was 13%. The growth in the total loan book on an AUM basis was 10%, HDFC said in a regulatory filing.
During the quarter the Corporation assigned loans amounting to ₹3,026 crore to HDFC Bank. Loans sold in the preceding 12 months amounted to ₹14,138 crore as compared to ₹ 23,767 crore in the year ago period.
As at September 30, the outstanding amount in respect of individual loans sold was ₹64,974 crore.
The growth in the individual loan book, after adding back loans sold in the preceding 12 months was 15%. The growth in the total loan book after adding back loans sold was 15%.
The overall collection efficiency for individual loans for the month of September 2020 (the first month after the moratorium) was 96.3%.
The collection efficiency for non-moratorium customers stood at 99.5%. As per regulatory norms, the gross non-performing loans as at September 30, 2020 stood at ₹8,511 crore. This is equivalent to 1.81% of the loan portfolio, HDFC said.
The non-performing loans of the individual portfolio stood at 0.84% while that of the non-individual portfolio stood at 4.19%.
The quarter saw resolutions in certain non-individual loans. “If the Honourable Supreme Court order of maintaining the classification of accounts as status quo till further orders were not to be considered, the non-performing loans would have been only two basis points higher at 1.83% of the loan portfolio; with individual NPLs at 0.88% and non-individuals NPLs at 4.19%,” HDFC said.
“As per regulatory norms, the Corporation is required to carry a total provision of ₹5,621 crore. Of this, ₹3,168 crore is towards provisioning for standard assets and ₹2,453 crore is towards non-performing assets,” it added.
The provisions at the end of the quarter stood at ₹12,304 crore. The provisions carried as a percentage of the Exposure at Default (EAD) is equivalent to 2.6%.
HDFC’s capital adequacy ratio stood at 20.7%, of which Tier I capital was 19.5% and Tier II capital was 1.2%.
As per the regulatory norms, the minimum requirement for the capital adequacy ratio and Tier I capital is 14% and 10% respectively.
For the quarter the consolidated profit after tax attributable to HDFC stood at ₹4,600 crore as compared to ₹ 10,389 crore in the previous year.
HDFC has made a provision of ₹1,200 crore towards COVID-19 related provisioning including ₹284 crore during the quarter.
Further, in accordance with RBI norms, loans for which asset classification benefits have been extended aggregated ₹7,977 crore.
“The Corporation carries adequate provisioning on such accounts. The Corporation has gradually unwound its high liquidity levels as seen in the previous quarter,” Mr. Mistry said.
Deposits registered a growth of 21%.
