Tag: interest income

HDFC’s Q1 net profit down marginally at ₹3,001 crore

Banking & Finance

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Housing Development Finance Corporation (HDFC) Ltd reported a 1.7 per cent drop in its net profit in the first quarter of the fiscal at ₹3,000.67 crore. Its net profit was ₹3,051.52 crore in the quarter ended June 30, 2020.

In a statement on Monday, HDFC Ltd said the profit numbers for the quarter ended June 30, 2021, however, are not directly comparable with that of the previous year. This is due to lower profit on sale of investments, dividend, higher charge for employee stock options and effective tax rate of 23.1 per cent in 2021-22 as against 15.4 per cent last fiscal.

“In the previous year, the tax on capital gains on sale of equity shares was low on account of grandfathering provisions as per the Income Tax Act, 1961,” it said.

HDFC Q4 net profit surges 42 per cent

HDFC provided ₹903.9 crore for tax in the quarter ended June 30, 2021 as against ₹555.31 crore a year ago.

However, shrugging off the impact of the second Covid wave, its net interest income surged by 22 per cent for the quarter ended June 30, 2021, to ₹ 4,147 crore compared to ₹3,392 crore in the previous year. Net interest margin was 3.7 per cent for the first quarter of the fiscal.

Loan disbursements

The country’s largest mortgage financier also saw a robust growth in individual loan disbursements at 181 per cent year-on-year in the first quarter of the fiscal.

“July 2021 disbursements were the highest ever in a non-quarter end month,” it said.

ICICI, Axis and HDFC Bank pick up stake in blockchain start-up

As at June 30, 2021, the assets under management grew 8.1 per cent to ₹5,74,136 crore as against ₹ 5,31,186 crore in the previous year.

The overall collection efficiency ratio for individual loans has improved during the month of June ‘21 to pre-Covid levels. The collection efficiency for individual loans on a cumulative basis in June 2021 stood at 98.3 per cent compared to 98 per cent in March 2021.

The gross non-performing loans as at June 30, 2021, stood at ₹ 11,120 crore or 2.24 per cent of the loan portfolio.

As per regulatory norms, HDFC is required to carry a total provision of ₹ 5,778 crore. Its Expected Credit Loss for the quarter ended June 30, 2021, was at ₹686 crore compared to ₹ 1,199 crore a year ago.

As at June 30, 2021, ₹4,482 crore has been restructured under the RBI’s Resolution Framework for Covid-19 related stress, which amounts to 0.9 per cent of the loan book.

Of the loans restructured, 38 per cent are individual loans and 62 per cent non-individual loans, HDFC said, adding that of the total restructured loans, 62 per cent is in respect of just one account.

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Analysts expect high slippages in banks’ Q4 results after SC verdict

Banking & Finance

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Reported slippages would be elevated, KIE said, but banks were not expected to report a worrying ratio, given the improvement seen in economic recovery in recent quarters.

As banks report their first set of quarterly earnings after the Supreme Court vacated an interim stay on the recognition of fresh bad loans, slippages could be elevated in Q4FY21, analysts said. Lenders could also reverse some amount of interest income, which could get reflected in their net interest income (NII) numbers. Kotak Institutional Equities (KIE) expects NII growth to be 18% year on year (YoY) for banks. “On the net interest income line, we see a higher level of one-off income recognition (due to NPL recovery) and income de-recognition (slippages recognised in this quarter on a cumulative basis for lenders who have not done it previously),” the brokerage said, adding that treasury income would be lower, too.

Reported slippages would be elevated, KIE said, but banks were not expected to report a worrying ratio, given the improvement seen in economic recovery in recent quarters. “We expect overall NPL (non-performing loan) ratios to remain significantly lower than RBI projections, considering that we have seen significant recovery of bad loans from a few companies (steel and infrastructure),” KIE said. Reported write-offs could be high as well.

Loan losses in the banking sector, as measured by the gross non-performing asset (GNPA) ratio could nearly double to 13.5% by September in a baseline scenario, and to as high as 14.8% in a severe-stress scenario resulting from the pandemic, the RBI had said in its last financial stability report (FSR). Volatile trends could emerge on provisions as lenders are likely to dip into Covid provisions made earlier or make higher provisions this quarter as well.

Analysts at Motilal Oswal Financial Services said while overall trends in asset quality had fared better than expectations, the recent surge in Covid-19 cases and the fear of a lockdown in key districts necessitate being watchful on asset quality. “While many banks have already provided for this likely increase and carry additional provision buffers, which should limit the impact on profitability, we expect them to continue to strengthen their balance sheets and credit cost to remain elevated,” they said in a report.

While analysts have mixed views on the pace of loan growth, most of them expect it to be driven by retail credit. Corporate credit growth remains muted in a scenario of overall deleveraging and lower risk appetite on the part of lenders.

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