HDFC Q1 results: Net profit falls but beats estimates

Mumbai: Corporation (HDFC) reported a 2 per cent fall in its June-quarter net profit at Rs 3,001 crore on lower dividend and investment incomes, but the earnings still beat analysts’ estimates, pointing to the robustness of core operations at India’s mortgage-lending pioneer.

Net profit in the year-ago quarter was Rs 3,052 crore at HDFC. A poll of analysts by Bloomberg had predicted net profit at Rs 2,605 crore. Net interest income (NII), or the lender’s core earnings from lending, climbed 22 per cent and net interest margin surged to 3.70 per cent up from 3.10 per cent reported a year earlier, paced by growth in loans to individuals.

There was a marginal increase in asset-quality slippage that chief executive officer Keki Mistry described as temporary. HDFC carries enough provisions to deal with the stress, he said. Mistry said the company holds Rs 13,189 crore of provisions — more than double the Rs 5,778 crore mandated by regulations.

“The second wave impacted collections and even means like SARFAESI could not be used. However, we are seeing a revival in economic activity and this impact is temporary,” Mistry said. “Our individual loans are secured with an average loan to value of 68 per cent.”

Loans to individuals climbed 22 per cent, and there was a sharp revival in disbursements through July after the Covid lockdowns disrupted business through the three months to June. Loans to companies and builders fell 9 per cent year on year due to large repayments by the corporation’s REIT borrowers and other AAA rated companies this quarter.

The impact of the second wave was felt on loan collections, pushing the quantum of bad loans to 2.24 per cent of advances from 1.98 per cent in the quarter ended March. HDFC also has a Rs 3,700-crore restructuring book. HDFC shares gained up to 1.88 per cent before ending at Rs 2,462 on the BSE.

The lender disbursed Rs 12,518 crore in July, the third-highest for a month ever and behind the more than Rs 16,000 crore disbursed in March — a record.

Collection efficiency also has improved to 98.3 per cent in June from 98 per cent in March.

Profit fell as unlike last year, HDFC did not have a big income from sale of investments.

Dividend income was also muted as annual meetings of large subsidiaries spilled over to the next quarter. Higher effective tax rate of 23 per cent versus 15 per cent last year also muted profits. Also, interest on excess liquidity fell to 3.16 per cent from 4.62 per cent a year earlier.

Individual loan disbursements climbed three times over the corresponding quarter of the previous year.

“The demand for home loans continues to remain strong and disbursements have picked up with the unlocking of respective locations. While disbursements during April and May of the current financial year were somewhat impacted, business has reverted to normalised trends in the months of June and July,” the company said in a statement.

The average size of individual loans increased to Rs30.9 lakh, up from Rs 29.5 lakh at the end of March. Total loan book increased to Rs 5.74 lakh crore, up 8 per cent from Rs 5.31 lakh crore a year earlier.

Individual loans comprised 78 per cent of total loans.

“The key risk to business remains a third wave and variants of the virus,” HDFC said.

The company has appointed lawyer Rajesh Narain Gupta as independent director and chartered accountant PR Ramesh as non- independent director in place of Naseer Munjee and JJ Irani. Both retired earlier this year.

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