Mortgage lender Housing Development Finance Corporation (HDFC) reported a pre-tax profit of Rs 3,607 crore in Q1FY21, compared to Rs 3,985 crore in the year ago period, down 9.5 per cent due to additional provisioning for Covid-19 related uncertainties and negative carry on account of higher liquidity. The numbers are, however, not comparable year-on-year (YoY), as the pre-tax profit of the lender was aided by stake sale in its life insurance subsidiary, dividend income and net gains from de-recognition of assigned loans.

After adjusting all the factors, the pre-tax profit of the lender at the end of June quarter stood at Rs 3,265 crore, compared to Rs 2,684 crore in the corresponding period last year, up 22 per cent. Net profit of the lender was down 4.73 per cent to Rs 3,051.52 crore versus Rs 3,203.10 crore in the same period last year.

The mortgage lender earned a net interest income (NII) of Rs 3,392 crore in Q1FY21, compared to Rs 3,079 crore in the corresponding period last year, but taking into account the high liquidity level, equity investments by the lender, the NII stood at Rs 3,609 crore, up 17 per cent year-on-year. Net Interest margin for the quarter stood at 3.1 per cent, down 2 bps, however, after adjusting for the negative carry NIM stood at 3.3 per cent, same as the last year.

The lender made additional provisions to the tune of Rs 404 crore due to the Covid-19 pandemic in the quarter under review and the total provisions for standard assets stood at Rs 1,199 crore.

Gross non-performing assets (GNPA) of the lender dropped 12 bps to 1.87 per cent in Q1FY21, compared to 1.99 per cent at the end of Q4Y20. NPA in the individual loan portfolio stood at 0.92 per cent, down 3 bps from 0.95 per cent in March, 2020 and in the non-individual portfolio, the NPAs were down 61 bps to 4.10 per cent.

The lender has 16.6 per cent of its individual loan portfolio and 22.4 per cent of the corporate book under moratorium as of now. Around 26 per cent of the lender’s loan book was under moratorium earlier, of which 22.6 was in the individual loan segment, and 27 per cent was in the corporate book.

Assets under management of the lender grew 12 per cent to Rs 5.31 trillion at the end of June quarter from Rs 4.75 trillion in the year ago period, with 11 per cent growth in the individual book and 12 per cent growth in non-individual book. Due to the lockdown, the lending activities of the lender got hampered but it has seen improvement since April. As of June, disbursements were at 71 per cent of what they were in the previous year and only focused on AAA rated corporates, while they were 68 per cent in the retail segment.

“The significant change during the quarter has been the shift to digital sourcing of business through various channel partners. As of date, 80 per cent of business has migrated to digital sourcing”, the lender said.

Deposits of the lender grew 26 per cent YoY to Rs 1.43 trillion. Its capital adequacy ratio stood at 17.3 per cent, of which Tier-1 capital was 16.2 per cent. It is also reported significantly higher levels of liquidity than the corresponding period last year with Rs 30, 820 crore invested in liquid mutual funds as on June 30, 2020.

Addressing the 43rd annual general meeting of the shareholders, Deepak Parekh, Chairman HDFC, allayed the fears that demand for commercial real estate would diminish with more people opting to work from home. He said, many large companies had in fact acquired or leased commercial properties during this period – particularly in Bengaluru and Hyderabad.

“There is demand for real estate from newer sectors like warehousing, e-ecommerce companies and from cloud and data centres parks as they seek to increase their data storage capacities as well”, Parekh added.

While unsold inventories was already high before the Covid-19 pandemic hit, but the inherent demand for home loans continues to remain strong and the combination of low interest rates, fiscal incentives and some softening of real estate prices bode well for new homebuyers, he said. However, Parekh hopes that the government will offer some sweetener like a temporary stamp duty waiver to encourage more homebuyers.