HDFC reports 22 per cent drop in net over spike in bad loans, provisioning

“On the balance sheet level, we are carrying provisions of Rs 10,988 crore, which is much higher than the regulatory requirement of Rs 4,188 crore,” said Keki Mistry, vice chairman and chief executive officer (CEO), HDFC.

Housing Development Finance Corp (HDFC) on Monday reported a 22% year-on-year (y-o-y) drop in net profit to Rs 2,232 crore, due to spike in bad loans and higher provisions. “On the balance sheet level, we are carrying provisions of Rs 10,988 crore, which is much higher than the regulatory requirement of Rs 4,188 crore,” said Keki Mistry, vice chairman and chief executive officer (CEO), HDFC. The lender has provided Rs 876 crore in the March quarter on account of Covid-19.

HDFC said that approximately 26% of its borrowers had opted for a moratorium. “Individual loans under moratorium account for 21% of the portfolio,” the company further said. The Reserve Bank of India (RBI) on Friday had extended the moratorium for borrowers by three months till August 31, 2020.

The management acknowledged the impact of Covid-19 on its business. Mistry added that the year saw a very strong demand for housing in the first 11.5 months, but the slowdown in the second half of March due to Covid-19, which is otherwise very busy.

The mortgage lender saw a spike in bad loans during the March quarter. As of March 31, 2020, the gross non-performing assets (NPAs) rose 63 basis points (bps) sequentially and 81 bps y-o-y to 1.99%. HDFC’s gross non-performing loans (NPLs) in value terms stood at Rs 8,908 crore. The NPLs of the individual portfolio stood at 0.95% while that of non-individual portfolio stood at 4.71%. “As we see normalcy in the system, we expect NPAs to get back to level which we used to see,” Mistry said on the rise in NPAs.

Total income in the March quarter was up 3.4% at Rs 11,981 crore, compared to the same quarter last year. The net interest income (NII) in the fourth quarter of 2020 rose 14% to Rs 3,564 crore, compared to Rs 3,139 crore a year ago.

The net interest margin (NIM) stood at 3.4%, showing an improvement of 10 bps compared to last quarter. The total loan book in the March quarter stood at Rs 4.5 lakh crore, up 11% y-o-y. The total individual loan approvals was up 14% in volume terms and 12% in value terms in the March quarter, compared to same quarter last year.

For the year ended March 31, 2020, the cost-to-income ratio stood at 9%, compared to 8.9% a year ago.

The HDFC board also approved a dividend of Rs 21 per share. “The dividend income received during the quarter was Rs 2 crore compared with Rs 537 crore a year ago,” the company said in a release. “While profit on sale of investment for the quarter stood at Rs 2 crore compared with Rs 321 crore in same quarter of the previous year,” it further added.

“HDFC’s capital adequacy ratio (CAR) stood at 17.7% of which tier 1 capital was 16.6% and Tier II was 1.1%,” Keki Mistry said