Tag: HDFC

HDFC Q4 net profit surges 42 per cent

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Housing Development Finance Corporation (HDFC) Ltd reported a 42.4 per cent jump in its standalone net profit at ₹3,179.83 crore for the fourth quarter of 2020-21.

Its standalone net profit was ₹2,232.53 crore in the fourth quarter of 2019-20.

For the full fiscal 2020-21, HDFC’s net profit however, declined 32.3 per cent to ₹12,027.3 crore versus ₹17,769.65 crore in 2019-20.

Also read: HDFC Bank unveils organisational changes to power future growth

“The profit numbers for the year ended March 31, 2021 are not comparable with that of the previous year. In the previous year, the corporation had recorded a fair value gain consequent to the merger of GRUH Finance with Bandhan Bank amounting to ₹9,020 crore,” HDFC said in a statement on Friday.

For the quarter ended March 31, 2021, HDFC reported a net interest income of ₹4,065 crore, which was 14 per cent higher compared to ₹3,564 crore in the previous year.

Net interest margin for the year ended March 31, 2021 stood at 3.5 per cent.

As at March 31, 2021, ₹4,479 crore is being restructured under the RBI’s Resolution Framework for Covid-19 related stress, amounting to 0.8 per cent of the assets under management.

Of the loans being restructured, 27 per cent are individual loans and 73 per cent non-individual loans.

Gross non-performing loans as at March 31, 2021 stood at ₹ 9,759 crore or 1.98 per cent of the loan portfolio.

During the quarter ended March 31, 2021, individual loan disbursements grew by 60 per cent over a year ago.

“The month of March 2021 witnessed the highest levels in terms individual receipts, approvals and disbursements. Growth in home loans was seen in both, the affordable housing segment as well as high-end properties,” HDFC said.

The board recommended a dividend of ₹23 per equity share of face value of ₹2 each for the financial year 2020-21.

It also approved the re-appointment of Keki Mistry as the Managing Director (designated as Vice Chairman and Chief Executive Officer) of HDFC for a period of three years with effect from May 7, 2021, subject to approval of the members at the ensuing AGM.

Further, the board approved issuance of Redeemable Non-Convertible Debentures (secured or unsecured) and any other hybrid instruments (not in nature of equity shares) up to ₹1.25 lakh crore during a one year period.

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Ramya Muraledharan joins Brickwork Ratings

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Ramya A Muraledharan, has joined Brickwork Ratings (BWR) as Director, Ratings.

She will be overseeing the banking, NBFC and securitisation ratings portfolio at BWR.

Ramya has a rich experience of 13 years with leading private sector banks working in areas such as credit appraisal, credit policy and processes, relationship management, early warning systems, stress testing, etc. She has handled diverse sectors such as non-banking financial services (NBFCs), telecom, ports and airports.

Prior to this appointment, Ramya was overseeing the credit portfolio pertaining to NBFCs and microfinance institutions at HDFC Bank as a vice-president. She was also associated with Axis Bank for over 8 years.

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Banks gear up for asset quality deterioration as stricter lockdowns loom, BFSI News, ET BFSI

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As India stares at lockdowns and curbs for the entire May, banks and NBFCs are Lenders are bracing for a further deterioration in asset quality metrics, cheque-bounce rates and collection ratios.

Collection levels had already dropped to 10% for lenders and cheque-bounce rates had increased in segments like small and medium enterprises, commercial vehicles and microfinance.

Analysts see cheque bounce levels rise by another 3-4% while collection ratios dropping by nearly 5% in May alone

Cheque bounces are back to January 2021 levels after improving in March with Maharashtra, Madhya Pradesh, Punjab, and Telangana are seeing higher check bounce rates, HDFC Bank said in its Q4 results.

Dishonoured cheques in April (half-way through the month) have risen slightly, possibly due to some panic caused by worsening medical conditions,” HDFC said after its Q4 results.

Till the first week of April, the worst affected state was Maharashtra but now many states have been severely impacted by the fresh pandemic surge. NBFCs and small finance banks face a bigger hit.

Axis Bank too has said collections are likely to get impacted in the coming weeks and it was watching the situation closely.

No cover this time

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das said after the central bank’s monetary policy review. However, that statement was before the second Covid wave worsened.

RBI stress test

Bank NPAs may rise to 13.5% under the baseline stress test scenario by September, the highest in more than 22 years, according to the RBI’ financial stability report in January this year.

The gross bad loan ratio of banks which stood at 7.5% as of 30 September, could almost double to 14.8% under a severe stress scenario, RBI warned. Under the severe stress scenario, RBI has assumed a 7.6% economic contraction in the six months to 31 March and a tepid 3.8% growth in the first half of the next fiscal. However, uncertainty over vaccines and the severity of the Covid wave hobbles the 3.8% growth projection.

The last time banks saw such stress was in 1996-97 when the bad loan ratio rose to 15.7%.



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HDFC-Indiabulls Housing co-lending partnership: Is it a prelude to something bigger?

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Is the co-lending partnership between Housing Development Finance Corporation Ltd (HDFC) and Indiabulls Housing Finance Ltd (IBHFL) a prelude to something bigger?

Currently, the Reserve Bank of India (RBI) only has guidelines for co-lending by banks and non-banking finance companies (NBFCs) for lending to the priority sector.

There are no specific RBI guidelines governing co-lending by two NBFCs (including housing finance companies/ HFCs).

 

So, the co-lending partnership between HDFC, India’s largest standalone HFC, and IBHFL, whose loan book shrunk in the second and third quarters of FY21, comes as a surprise.

In terms of RBI’s “Co-Lending Model”(CLM), banks are permitted to co-lend with all registered NBFCs (including HFCs) based on a prior agreement.

Under this model, NBFCs are required to retain a minimum of 20 per cent share of the individual loans originated by them on their books, with the partner banks taking their share on a back-to-back basis in their books.

As per RBI guidelines, CLM is aimed at improving the flow of credit to the unserved and underserved sector of the economy and make available funds to the ultimate beneficiary at an affordable cost, considering the lower cost of funds from banks and greater reach of the NBFCs.

HDFC, in a statement, said the objective of the co-lending program is to increase its distribution bandwidth, which will lead to additional retail housing loan business.

Under the co-lending programme, IBHFL will originate and process retail home loans as per jointly formulated credit parameters and eligibility criteria. The Corporation will have 80 per cent of the total loan in its books. IBHFL will service the loan account throughout the life cycle of the loan

So, once the co-lending partnership matures, what could be the next logical step? Is this partnership a smoke signal on a possible amalgamation down the line? Only time will tell.

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Indiabulls Housing, HDFC ink pact for co-lending

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Indiabulls Housing Finance (IBH) and mortgage lender HDFC Ltd have entered into a strategic co-lending partnership with HDFC Ltd to offer housing loans at competitive rates.

IBH will originate retail home loans as per jointly drawn up credit policy and retain 20 per cent of the loan in its books, and 80 per cent will be on HDFC books, Indiabulls Housing said in a regulatory filing on Wednesday.

IBH will service the loan account throughout the life cycle of the loan, it said.

The co-lending partnership with HDFC Ltd will act as a cornerstone to IBH’s new balance-sheet light growth business model, Indiabulls Housing said.

HDFC Ltd is the market leader in the housing finance industry in India with assets under management of over ₹5.52 lakh crore at December-end 2020.

It is a gold-standard financial services company and is rated at the highest long term rating of AAA by CRISIL, ICRA and CARE Ratings.

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HDFC Bank CEO outlines ‘Technology Transformation’ plan to fix digital glitches, BFSI News, ET BFSI

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HDFC, which has been hit by several digital glitches since the past year, has embarked on a scale changing technology adoption and transformation agenda to help drive its ambitious future growth plans.

“Our aim is to “Keep Systems ALWAYS ON. ALWAYS SECURE. AND PERFORM at SCALE”. While we execute this Technology Transformation agenda, there will sometimes be pain and outages beyond our control. We must doubly resolve to reach out proactively to our customers / stakeholders and explain the path that we are traversing to make their experience with us smoother, faster and better,” HDFC Bank CEO Sashi Jagdishan wrote in a letter to staff.

Some of the specific initiatives the bank has embarked under Technology Transformation Agenda, according to Jagdishan, include:

1. Infrastructure scalability: We have invested heavily in the scale up of our infrastructure to handle any potential load that we will encounter for the next 3/5 years. We are also in the process of accelerating our cloud strategy to be on the cutting edge leveraging best in class cloud service providers.

2. Disaster Recovery (DR) resiliency:

a. We have strengthened our process of monitoring our Data Centre (DC) and have shifted key applications to new DC.

b. DR switch over for Disaster recovery resiliency has been completed for key customer facing applications including automating DR switch over for key applications.

c. Enhanced monitoring capabilities have been put in place to manage our Data centre operations and Resiliency processes.

3. Security Enhancements: We have strengthened our firewalls further. We have to be scanning the horizon for potential security issues and be ever prepared to face them. We haven’t had any security issues in the past. But this is always an important area of focus and action plans are underway for further robustness.

4. Monitoring mechanisms. An enhanced application monitoring mechanism has been put in place across the board to enable us to keep our IT systems Always On.
Reasons for glitches

On technical issues, Jagdishan gave an elaborate reasoning for failures:

November 2018: Crash of the New Mobile Banking App.

Reason: We faced an unprecedented demand to download the new mobile app. We have learnt and since refined our processes of managing the mobile banking app and has never faced any such challenges later. After the Nov 2018 initial launch, we have upgraded our mobile app seven times over the last two years and in all these instances it has been a smooth affair with no downtime or customer inconvenience whatsoever.

December 2019: Outage with Mobile Banking App

Reason: All banking systems are complicated and interconnected and each component has to work efficiently for us to deliver our promise to our customers. In this instance, one of the vendors system upgrade patch issue was faulty and the same has been addressed adequately. We have and will continue to reinforce vendor patch application.

November 2020: Outage at Data centre

Reason: A third party human error lead to the downtime. To remove this risk completely, we have taken several actions to mitigate such instances in future.

March 1, 2021: Net Banking/Mobile Banking downtime

Reason: The issue here occurred on account a faulty signature on our HIPS (Host Intrusion prevention software). This was an issue acknowledged by the manufacturer which impacted several global clients as well. The faulty signature resulted in slowing down response on Net banking and mobile banking. This has, since, been rectified.

March 31, 2021: Net Banking/Mobile Banking downtime

Reason: The issue occurred on account of a hardware component failure in one of our database servers resulting in a slow response to some of our customers. A large number of our customers were able to carry out their NB/MB activities in this period and we saw only a marginal dip in the number of transactions that day.

“To put things in perspective, in the last 28 months, we have had 5 instances of downtime. Every instance has hardened our resolve to do better keeping our customers in mind,” Jagdishan said.

Advice to staff
Business objectives should be driven keeping in mind the 3Cs that I wrote about in my last communication to you. It is Culture, Conscience and Customers. Continue to keep the humility quotient (HQ) high and make it part of your DNA. I have committed myself to be part of the on-going cultural transformation and I urge each one of you to inculcate and espouse the same mantra down the line. The broad macro opportunities continue to present themselves across the retail, MSME and Corporate Banking for a Bank like us and across geographies’ like semi-urban and rural markets, he said.



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HDFC Bank Q4 net profit up 18.2%

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Private sector lender HDFC Bank reported an 18.2 per cent increase in its standalone net profit to Rs 8,186.51 crore for the quarter ended March 31, 2021 led by robust growth in its net interest income.

Its net profit was Rs 6,927.69 crore in the fourth quarter of 2019-20.

The bank’s net profit for 2020-21 rose by a similar 18.5 per cent to ₹ 31,116.5 crore from Rs 26,257.32 crore a year ago.

However, on a sequential basis, HDFC Bank’s net profit fell by 6.5 per cent from Rs 8,758.29 crore in the October to December 2020 quarter.

The bank’s net revenue increased by 16.4 per cent to ₹ 24,714.1 crore for the quarter ended March 31, 2021 from ₹ 21,236.6 crore a year ago.

Net interest income grew by 12.6 per cent to Rs 17,120.2 crore for the fourth quarter of the fiscal from ₹ 15,204.1 crore in the corresponding period in 2019-20. This was driven by advances growth of 14 per cent, and a core net interest margin of 4.2 per cent.

Other income grew by 25.9 per cent to ₹ 7,593.9 crore in the fourth quarter of 2020-21 from ₹ 6,032.6 crore in the corresponding quarter ended March 31, 2020.

Provisions and contingencies

Provisions and contingencies for the quarter ended March 31, 2021 increased by 24 per cent to ₹ 4,693.7 crore in the fourth quarter of the fiscal as against ₹ 3,784.5 crore for the quarter ended March 31, 2020.

“The bank also continues to hold provisions as on March 31, 2021 against the potential impact of Covid-19 based on the information available at this point in time and the same are in excess of the RBI prescribed norms,” HDFC Bank said in a statement on Saturday.

It held floating provisions of ₹ 1,451 crore and contingent provisions of ₹ 5,861 crore as on March 31, 2021. Total provisions (comprising specific, floating, contingent and general provisions) were 153 per cent of the gross non-performing loans as on March 31, 2021.

NPA

Gross non-performing assets were at Rs 15,086 crore or 1.32 per cent of gross advances as on March 31, 2021, as against 1.38 per cent (proforma approach) as on December 31, 2020 and 1.26 per cent as on March 31, 2020. Net non-performing assets were at 0.4 per cent of net advances as on March 31, 2021 versus 0.36 per cent a year ago.

The bank’s total Capital Adequacy Ratio was at 18.8 per cent as on March 31, 2021.

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HDFC Bank Q4 advances up 14%, deposits grow 16%

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Private sector lender HDFC Bank reported a 13.9 per cent growth in advances as on March 31, 2021 compared to a year ago and 16.3 per cent increase in deposits in the same period.

In a regulatory filing on Monday, the bank said its advances rose to ₹11.32 lakh crore as of March 31,2021 compared to ₹9.93 lakh crore in the same period a year ago. On a quarter on quarter basis, advances grew by 4.6 per cent over ₹10.82 lakh crore as of December 31, 2020.

“As per regulatory (Basel 2) segment classification, domestic retail loans as of March 31, 2021 grew by around 7.5 per cent over March 31, 2020 and around 5 per cent over December 31, 2020; domestic wholesale loans as of March 31, 2021 grew by around 21 per cent over March 31, 2020 and around 4.5 per cent over December 31, 2020,” HDFC Bank said.

Its deposits grew to about ₹13.35 lakh crore as of March 31, 2021 versus ₹11.47 lakh crore a year ago. It amounted to a grow of about five per cent on a quarterly basis compared to ₹12.71lakh crore as of December 31, 2020.

CASA deposits of the bank grew by 27 per cent to about ₹6.15 lakh crore as of March 31, 2020 compared to ₹4.84 lakh crore in the same period last fiscal.

HDFC Bank said its CASA ratio stood at around 46 per cent as of March 31, 2021 compared to 42.2 per cent a year ago.

During the quarter ended March 31, 2021, the Bank purchased loans aggregating ₹7,503 crore through the direct assignment route under the home loan arrangement with Housing Development Finance Corporation Limited.

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HDFC Capital, Cerberus set to pair up for $1 billion real estate investment fund, BFSI News, ET BFSI

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HDFC Capital and global alternative investment major Cerberus Capital Management LP have formed a partnership to create a fund that will focus on high-yield opportunities in Indian residential real estate. The size of the proposed fund will be upwards of $1 billion, said people familiar with the development.

The fund, to be set up through an affiliate of New York-headquartered Cerberus Capital, will target stressed projects, purchase inventory and provide last-mile funding for under-construction residential projects.

“Housing is an integral part of our economy and because of its linkages to other industries and to the labour market, it is a critical sector for ensuring economic growth,” Deepak Parekh, chairman of Housing Development Finance Corporation (HDFC), of which HDFC Capital is a subsidiary, told ET.

The deal is another sign of foreign investment firms’ growing interest in India. “Despite the massive need for housing in the country, a large number of launched projects are in distress, leading to a complete standstill in execution,” said Parekh. “This platform will provide much-needed financing for housing projects and help in delivery of finished units to home buyers.” HDFC and Cerberus declined to comment on the size of the proposed fund.

Currently, the government-backed Special Window for Completion of Construction of Affordable and Mid-Income Housing (SWAMIH) projects is the only large dedicated federal financing pipeline for such projects.

Allow partial exit to lenders

“The structure of the HDFC-Cerberus fund will make it complementary to the government-led SWAMIH fund, as it will also allow partial exit for existing lenders of the project, thereby increasing the scope of projects that can be covered for resolution,” said Vipul Roongta, managing director, HDFC Capital.
HDFC Capital, Cerberus set to pair up for $1 billion real estate investment fundWhile HDFC and other financial institutions have invested in SWAMIH fund, the HDFC-Cerberus fund will be the only private sector initiative with an objective of resolving the issue of stuck and distressed housing projects.

“Cerberus has a long track record of partnering with businesses and properties around the world,” said Frank Bruno, co-chief executive, Cerberus. “We are able to provide tailored solutions in sectors with dislocated funding channels in various forms, such as the purchase of assets, creation of operating and lending platforms, and provision of structured capital to best-in-class operators.”

Cerberus has been active in India since 2019 across verticals including acquisition of non-performing assets, provision of capital to corporates and creation of financial services and real estate platforms.



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Bank FD rates set to rise as inflation, recovery take hold, BFSI News, ET BFSI

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Banks and non-banking finance companies have started increasing deposit rates across tenures, especially rates on longer-term FDs on likely recovery in credit demand and rising inflation.

The number of lenders offering higher rates may go up over the next few months.

HDFC, Bajaj Capital

Mortgage lender HDFC has increased rates on fixed deposits maturing between 33 and 99 months by 10-25 basis points for the first time in 29 months. HDFC said from March 30, fixed deposits of 33-month duration will fetch 6.2% annualised returns while fixed deposits with 66-month maturity will now fetch 6.6% interest rate and the 99-month deposits will receive 6.65% interest rate. Further, senior citizens would get 0.25% more on the above-mentioned rates. Worth mentioning here is that this is the first time after October 2018 that HDFC Ltd has raised deposit rates. In February, Bajaj Finance, another top-rated lender had raised interest rates on fixed deposits by 40 basis points. Fixed deposits from Bajaj Finance with tenures of three to five years earn 7%.

Negative rate prospects

The finance ministry gave a scare of a rate cut on small savings schemes as such a move would have put pressure on reduction in bank deposit rates.

With inflation above 5%, deposit rates are already threatening to veer into negative territory, any rate cut would be a double whammy for depositors.

Retail depositors have struggled during the pandemic to maintain their earnings and also ensure inflation doesn’t erode their savings.

If inflation continues to rise, banks will have to offer higher deposit rates to investors, who in sight of negative returns, may shift their money elsewhere.

Rates kept down

In 2020, due to the pandemic, the Reserve Bank of India’s (RBI) adopted an accommodative stance with measures to keep the policy rates down throughout the year. It also announced measures to infuse liquidity in the banking system to be able to provide affordable financing and hence, support economic growth. Extra liquidity also kept interest rates down. The credit offtake was low as banks adopted a cautious stance towards lending across all sectors of the economy, which led to lower rates.

Growth this year

However, the banking system’s credit growth will almost double to 10 per cent in 2021-22 on the economic recovery and policy interventions.

The economic growth pegged at 10.5% by RBI for FY21-22 and 12% by foreign rating agencies. From a banks’ credit growth perspective, the agency said the expansion will accelerate by 4-5 percentage points to 9-10 per cent in 2021-22.

The faster credit growth will be led by retail loans, which are expected to grow in mid-teens, while corporate loans, which de-grew during 2020-21, are also likely to show a 5-6 per cent jump. This is expected to be driven by investment demand from infrastructure and real estate sectors as well as the release of pent-up consumer demand, thus resulting in high growth in retail finance.

The growth and demand for credit is likely to push up fixed deposit rates in the next 3-9 months.

RBI measures

Contrary to its accommodative stance, RBI has already reduced its liquidity support to the market with no additional liquidity measures announced in the latest monetary policy review in February 2021. It has withdrawn the 1% Cash Reserve Ratio relaxation for banks and now the CRR must be brought up to 4% in two tranches. A hike in CRR will lead to a reduction in liquidity available with banks which may force them to look out for more funds from retail depositors to meet their credit demand, thus adding another factor that can result in higher deposit rates.



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