HDFC’S PBT down 27% on Covid provisioning

Mortgage lender Housing Development Finance Corporation (HDFC) on Monday reported a 27 per cent decline in profit before tax (PBT) at ~2,692 crore in the March quarter of 2019-20 because of higher provisioning for uncertainties due to the Covid-19 pandemic. Its PBT was ~3,691 crore in the same period a year ago. The lender’s net profit declined 22 per cent to ~2,233 crore in the fourth quarter.

Housing Development Finance Corporation (HDFC) on Monday reported a 27 per cent decline in profit before tax (PBT) at ~2,692 crore in the March quarter of 2019-20 because of higher provisioning for uncertainties due to the Covid-19 pandemic. Its PBT was ~3,691 crore in the same period a year ago.

The mortgage lender’s net profit declined 22 per cent to ~2,233 crore in the fourth quarter, compared to ~2,862 crore in the year-ago period.

It made provisions of ~1,274 crore in the quarter, up 220 per cent from ~398 crore in the same period last financial year, because of Covid-19. Around 26 per cent of the lender’s loan book is under moratorium. In the individual loan segment, 21 per cent of the loan under management is under moratorium.

Keki Mistry, vice-chairman and chief executive officer of HDFC, said doubted more people would opt for the moratorium. “People had time till May end to take the moratorium. So, whoever wanted to take the moratorium has already taken it”, he said. The RBI, last week, extended moratorium on term loans for another three months to August end.

After fair value adjustments, profit on sale of investment, dividend, and provisioning, the profit before tax for the quarter grew 15 per cent at ~3,535 crore, as against ~3,064 crore in the year-ago period, the lender said.

The non-performing assets (NPAS) of the lender rose to 1.99 per cent in Q4FY20, compared to 1.18 per cent in Q4FY19. While individual loans segment saw ratio of bad loans rising 25 basis points to 0.95 per cent from 0.70 per cent, the non-individual segment a steep rise in bad loans ratio to 4.71 per cent from 2.34 per cent.

Mistry said they downgraded two non-individual loans despite them not being an NPA because they saw some stress in these loans. Had they not shown these loans as NPAS, the NPA in non-individual segment would have been 3.7 per cent.

As far as individual loan segment is concerned, 97 per cent of its customers use electronic modes of repayment for their instalments. However, in respect of 3 per cent of borrowers, where follow-ups would have otherwise been done through personal visits, this was not possible owing to the lockdown. Recovery efforts were hampered in the latter half of March 2020, which resulted in an increase in individual nonperforming loans, HDFC said.

“My sense is that when normalcy returns, the individual non-performing loan numbers will get back to the levels at which we were used to seeing them,” Mistry said.

The total loan book of the lender grew 12 per cent to ~5.16 trillion while the individual loan book grew 21 per cent.

The good part is that every day we are seeing a rise in the amount we are disbursing. But still we are nowhere close to normal. My sense is the first quarter will be very weak, the second will be better, third quarter will be even better and the fourth quarter will be 85-90 per cent normal, said Mistry. “At senior level, there will be some cut in bonuses. For us, it’s business as usual. But we are not hiring and also not letting anyone go at the moment. If business picks up six months later, we will look to hire people,” he said.

“AT THE SENIOR LEVEL, THERE WILL BE SOME CUT IN BONUSES. FOR US, IT’S BUSINESS AS USUAL. BUT WE’RE NOT HIRING AND ALSO NOT LETTING ANYONE GO”

KEKI MISTRY, HDFC vice-chairman & CEO