HDFC Q3 results update!
Last updated: 02 Feb, 2021 | 12:49 pm
- Net profit declines: HDFC has reported a 65% on-year drop in consolidated net profit to Rs 2,926 crore in Oct-Dec, beating street's consensus estimate of ₹2,700 crore. HDFC said that bottom line numbers are not comparable with the previous quarter, as the company had reported a one-time gain of Rs 9,020 crore last year due to the merger between Gruh Finance and Bandhan Bank. 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 Q3FY21, would be ₹3,694 crore compared to ₹2,908 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 26% on a yearly basis to Rs 4,608 crore. Net Interest Margin stood at 3.4% for Q3FY21.
- Strong loan growth: As the economy opened up, the company saw improving traction in the loan segment on a sequential basis. During Q3FY21 individual loan disbursements grew 26% YoY. The month of December 2020 witnessed the highest ever levels in terms of receipts, approvals and disbursements. On an AUM basis, the growth in the individual loan book was 10%. The growth in the non-individual loan book was 7%. The growth in the total loan book on an AUM basis was 9%. The chart below shows HDFC revenue from various segments.
- Asset quality: The overall collection efficiency is nearing pre-Covid levels. The collection efficiency for individual loans in the month of December 2020 stood at 97.6% compared to 96.3% in the month of September 2020. 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 higher at 1.91% (from 1.67%) of the loan portfolio; with individual NPLs at 0.98% and non individuals NPLs at 4.35%. As on Dec. 31, HDFC held provisions worth Rs 12,342 crore compared with the regulatory requirement of Rs 6,579 crore.
- Liquidity Health: Capital adequacy ratio stood at 20.9%, of which Tier I capital was 19.9%.
HDFC, the country's largest mortgage lender has seen a strong recovery in its operations. The demand for home loans continued to remain strong owing to low interest rates, softer property prices, concessional stamp duty rates in certain states and continued fiscal incentives on home loans. The asset quality has also shown improvement.
During the nine months ended December 31, 2020, 34% of home loans approved in volume terms and 17% in value terms were to customers from the Economically Weaker Section (EWS) and Low Income Groups (LIG). HDFC could see an improvement in this segment of its loan portfolio, especially after Union Budget extended the timeline for taking home loans for affordable homes and claiming additional tax deduction on interest payment till March 31st 2022. Going forward, the company is well-positioned to take advantage of the demand recovery given its leadership status.