Bajaj Finance Q1 results: Key highlights from the company’s earnings concall

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Bajaj Finance on July 20 reported a 4.2 percent year-on-year growth in consolidated profit at Rs 1,002 crore for the quarter ended June 2021, with asset quality under pressure and elevated provisions.

The consolidated profit in the year-ago quarter was at Rs 962 crore.

The company's consolidated net interest income grew by 8 percent to Rs 4,489 crore compared to the corresponding quarter of the last fiscal, the company said in its BSE filing.

The interest income reversal for the quarter was Rs 451 crore as compared to Rs 306 crore in the year-ago period.

Here are the highlights from Bajaj Finance's Q1 FY22 earnings call as compiled by Narnolia Financial Advisors:

Due to lower debt management efficiencies and consequent increase in GNPA, interest income reversal for 1QFY22 was higher at Rs 451 crore as compared to Rs 306 crore in 1QFY21. In absence of a third wave, the company expects quarterly interest reversals to normalize by 3QFY22.

Also read: Bajaj Finance: Auto loan business asset quality numbers give shocker in Q1

The company expects further reduction in cost of funds, as liquidity buffer and borrowing basket is reinstated to pre-COVID levels.

OPEX to NII is likely to normalize to 33% by 4QFY22.

Business transformation remains on track for phase-1, will go live in October 2021.

In absence of a third wave, the company expects quarterly AUM growth rate for balance of the year to be at pre-COVID levels.

New customer addition in 1Q has come in line with general guidance of 7-8 MM new customer addition annually.

Average EMI bounce rate in 1QFY22 was approximately 1.08X of 4QFY21. The bounce rate for July 2021 has improved to 0.96X of 4QFY21.

In 1QFY22, auto finance business was worst affected. Its GNPA increased by Rs 1199 crore from Rs 1227 crore to Rs 2426 crore QoQ.

Non overdue one-time restructuring (OTR) book stood at Rs 1287 crore as of 1QFY22 versus Rs 1739 crore as of 4QFY21. The Company has considered OTR as an indicator of significant increase in credit risk and as a matter of prudence classified it as Stage 2. The Company holds ECL provision of Rs 235 crore (18.3%) against the OTR book.

The company has management overlay provision of Rs 483 crore as of 1QFY22.

In absence of a severe third wave, the company is committed to bring down its GNPA to 1.7-1.8% & NNPA to 0.7-0.8% by 4QFY22. Accordingly, the company estimates its overall credit cost for the year to be Rs 4200-4300 crore.

Write-off stood at Rs 900 crore in 1QFY22.