HDFC Q2 result update!
Last updated: 02 Nov, 2020 | 11:46 am
- Net profit declines: HDFC has reported a 28% on-year drop in consolidated net profit to ₹2,870 crore in Q2FY21, beating street’s consensus estimate of ₹2,313 crore. HDFC said that bottom line numbers are not comparable on the account of dividend income and profit on sale of investments of ₹323 crore in this quarter as against ₹2,701 crore last year. If it were to adjust the profit for such transactions like dividend, profit on sale of investments, fair value adjustments, net gains on loans assigned, employee stock options and charge an provisioning, the adjusted profit before tax for the quarter ended Q2FY21, would be ₹3,366 crore compared to ₹2,646 crore in the previous year, reflecting a growth of 27%.
- Net interest income rises: A NBFC’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. This is an extremely important number to truly find out as to how much the company is earning from its core operations. Net interest income for HDFC grew 21% on a yearly basis to ₹3,647 crore. Net Interest Margin stood at 3.3% for Q2FY21.
- Strong loan growth: As the economy opened up, the company saw improving traction in the loan segment on a sequential basis. Prevailing low-interest rates, softer property prices, reduction in stamp duty in certain states and inherent strong demand for home loans bodes well for the housing finance sector. During Q2FY21 individual loan application receipts grew 12% and approvals grew by 9% compared to the corresponding quarter of the previous year. Individual disbursements were at 95% levels of the previous year. 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%. The chart below shows HDFC revenue from various segments.
- Asset quality: The overall collection efficiency for individual loans for the month of Sep-20 (the first month after the moratorium) was 96.3%. The collection efficiency for non-moratorium customers stood at 99.5%. GNPL(Gross non-performing loans) stood at 1.81%, in which individual portfolio stood at 0.84% while that of the non-individual portfolio stood at 4.19%. If the 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%. The provisions as on September 30, 2020, stood at ₹12,304 crore.
- Liquidity Health: 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. In August 2020, HDFC raised ₹10,000 crore of equity capital through a Qualified Institutions Placement. It also received ₹307 crore upfront through the issue of warrants. As the company saw that the economy is moving back to pre COVID levels, it has gradually unwound its high liquidity levels as seen in the previous quarter. The average daily balance in liquid funds during the quarter ended September 30, 2020, was ₹22,500 crore compared to ₹32,000 crore in the previous quarter.
HDFC, the country’s largest mortgage lender has seen a strong recovery in its operations. According to Keki Mistry, CEO, HDFC - Disbursements in October were the second-highest in HDFC’s history, indicating strong demand for housing loans. He also said that “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.”
Even though stress may emerge in coming quarters for the Banking & Finance Industry, we believe, HDFC has the necessary firepower to ride out the period and live up to the legacy that it has.