Bajaj Finserv Q3 net profit up 15% at Rs 1,290 crore; income up 9%

Bajaj Finserv, the holding company of the financial services business of the Bajaj group, has reported a 15 per cent growth in its net profit for the October – December (Q3FY21) at Rs 1,290 crore, compared to Rs 1,126 crore in the corresponding period of FY20.

The consolidated total income of the company rose 9.61 per cent to Rs 15,961 crore in Q3FY21, compared to Rs 14,561 crore in Q3FY20.

It holds a little over of 52 per cent in the consumer finance giant Bajaj Finance, 74 per cent in Bajaj Allianz general insurance and Bajaj Allianz life insurance.

The general insurance arm of the company reported a 73 per cent rise in net profit at Rs 330 crore in Q3FY21, compared to Rs 191 crore in Q3FY20. The gross premium underwritten by the general insurer rose 11 per cent to Rs 3,392 crore. Furthermore, the insurer has reported an underwriting profit to the tune of Rs 27 crore in the reporting quarter versus an underwriting loss of Rs 87 crore in the corresponding period of FY20.

The combined ratio of the insurer stood at 93.6 per cent in Q3FY21. Combined ratio is a measure of profitability used by an insurance company to gauge how well it is performing in its daily operations. A ratio below 100 percent indicates that the company is making an underwriting profit, while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.

Claim ratio of the insurer reduced to 66.6 per cent in Q3 FY21, compared to 72.6 per cent in Q3 FY20, despite higher claims in health segment from covid.

The life insurance arm of the company, on the other hand, reported a moderation in net profit at Rs 118 crore in Q3FY21, compared to Rs 143 crore in Q3FY20, down 17 per cent. New business premium of the life insurer increased 21 per cent to Rs 1,706 crore in Q3FY21 while renewal premium growth was 26 per cent at Rs 1,441 crore. Solvency ratio stood at a healthy 708 per cent as on 31 December 2020 as against the minimum regulatory requirement of 150 per cent.

Consumer finance giant Bajaj Finance’s net profit fell 30 per cent to Rs 1,049 crore in October – December quarter (Q3FY21), compared to Rs 1,488 crore in the corresponding period in FY20 owing to a fall in net interest income and rise in provisions. But the company has said as the loan loss provisions, interest reversals and cost of surplus liquidity normalizes to pre- covid levels by Q1 FY22, it's profitability will improve.

Net interest income of the lender fell 7.24 per cent to Rs 3,977 crore in the reporting quarter (Q3FY21), compared to Rs 4,265 crore in Q3FY20 due to higher reversal of interest income at Rs 456 crore compared to Rs 82 crore in corresponding period of FY20 and also due to high cost of liquidity at Rs 193 compared to Rs 72 crore. Total income also fell by 7 per cent on a standalone level to Rs 5,847 crore in Q3FY21, compared to Rs 6,316 crore in Q3FY20.

Provisions for the lender, on a standalone level, increased 52 per cent to Rs 1,245 crore in Q3FY21, compared to Rs 817 crore in Q3FY20 due to a one time write off of Rs 1,970 crore and interest outstanding of Rs 365 crore because of covid19 related stress. Furthermore, it holds management overlay provision to the tune of Rs 800 crore as of December end for covid related stress. 

However, the company said, from FY22 onwards it expects loan losses and provisions to revert to pre-covid levels of 160-170 bps of average assets. If recoveries are better in FY22, we may experience lower net loan loss to average assets, it added.

As per the RBI resolution framework, the lender has provided restructuring option to loans worth Rs 2,040 crore, of which Rs 930 crore is from the mortgage portfolio, Rs 523 crore is from the unsecured portfolio. It is holding Rs 397 crore as provision against the restructuring proposals it has granted.

While gross non-performing assets (NPA) for the reporting quarter stood at 0.55 per cent and net NPAs stood at 0.19 per cent, the pro-forma gross NPAs stood at 2.86 per cent and net NPAs at 1.22 per cent. “The B2B businesses, both urban and rural, have seen increase in net NPAs by 7 bps, SME business by 48 bps, B2C business by 89 bps and auto finance by 348 bps)”, the company said. However, it expects to revert to pre-Covid net NPA levels by H1FY22 in most of its segments, except for auto finance business which may take longer due to underlying collateral.