HDFC's adjusted net profit up 27% in Q3

Figure not comparable with Q3FY20, when it booked a fair value gain of over Rs 9,000 crore due to merger of Gruh Finance with Bandhan Bank

The country’s largest mortgage lender HDFC reported a net profit of Rs 2,925.83 crore in the October-December quarter (Q3) of FY21, down 65 per cent compared to a profit of Rs 8,372.49 crore in the corresponding period of FY20.
 
However, the profit figures are not comparable because in Q3 of FY20, it booked a fair-value gain of over Rs 9,000 crore due to merger of Gruh Finance with Bandhan Bank.
 
Also, in the reporting quarter, it booked a profit of Rs 157 crore by selling a part of its stake in HDFC Life Insurance to adhere to the regulatory requirements. Hence, in a like-for-like comparison, discounting all other factors, the mortgage lender’s net profit was up 27 per cent to Rs 3,694 crore, compared to Rs 2,908 crore in the year-ago period.
 
Net interest income (NII) of the lender was up 26 per cent to Rs 4,068 crore in Q3 of FY21 compared to Rs 3,239.92 crore in Q3 of FY20. It has slowly started reducing the amount of excess liquidity it was carrying, which explains the strong rise in NII. In Q1, it was carrying excess liquidity to the tune of Rs 32,000 crore, and in Q2, the figure was 24,800 crore. In Q3, it has been reduced to Rs 17,000 crore. Net interest margin at the end of nine months of FY21 was 3.4 per cent.
 
For the lender, loan approvals for individuals in Q3 was higher by 32 per cent compared to the corresponding period of last financial year. Similarly, disbursements were higher by 26 per cent.
 
“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,” the lender said.

 
Furthermore, it said, December 2020 witnessed the highest ever levels in receipts, approvals and disbursements.
 
It iterated the fact that this is not pent up demand as 91 per cent individual disbursements in Q3 consisted of property deals entered over the past four months. “Growth in home loans was seen in both the affordable housing segment as well as high-end properties,” the mortgage lender said.
 
“In the nine-month period, 80 per cent of the growth in loan book has been in the individual segment and 20 per cent in the non-individual segment. But as much as 137 per cent growth during the quarter came from individual loans and non-individual loan book degree 37 per cent,” said Keki Mistry, vice-chairman and chief executive officer (CEO), HDFC.
 
As far as asset quality is concerned, its reported gross non-performing loans (NPL) stood at 1.67 per cent. If not for the Supreme Court order on asset classification standstill, its NPL would have risen to 1.91 per cent. This would make individual loan portfolio NPL at 0.98 per cent and non-individual loan portfolio NPL at 4.35 per cent.
 
Collection efficiency of the lender has improved and is nearing pre-Covid levels. As of December, collection efficiency in the individual loan book stood at 97.6 per cent compared to 96.3 per cent in the September quarter.
 
In Q3, the lender’s expected credit loss is to the tune of Rs 594 crore compared to Rs 2,995 crore in the year-ago period. However, it is carrying Rs 12,342 crore as provision on its books as of December 31. “For Covid, we still continue to carry a provision of Rs 959 crore and will in due course reduce provisions,” Mistry added.