HDFC Q2 PAT may dip up to 50% YoY, lower loan restructuring seen: Analysts

Absence of significant profit on investments, and low dividend income of Rs 320 crore YoY could optically make HDFC's pre-provisioning profit look modest, analysts say

Mortgage-lender HDFC (Housing Development Finance Corporation) may report an up to 50 per cent year-on-year (YoY) decline in net profit for September quarter of FY21 (Q2FY21) on the back of below-par loan growth, lower dividend income, and possible higher discretionary provisioning.

The financier, which is slated to report its second quarter results on November 2, had reported a net profit of Rs 3,961.5 crore in the year-ago period. Sequentially, PAT stood at Rs 3,051.5 crore in June quarter of FY21. Profit before tax (PBT), meanwhile, was Rs 4,530 crore during Q2FY20 after a dividend income of Rs 1,074 crore. In Q1FY21, PBT was Rs 3,607 crore.

On the asset quality front, the gross non-performing loans stood at Rs 8,631 crore as at June 30, 2020. This was equivalent to 1.87 per cent of the loan portfolio. The housing financier had provisions worth Rs 12,285 crore as at June 30, 2020, of which Covid-19-related provisions worth Rs 404 crore were made during the June quarter.

Here’s what leading brokerages expect from Q2FY21 nos:

Edelweiss Securities

Analysts here expect the PAT to halve to Rs 1,973.4 crore during the quarter under review compared with the previous fiscal quarter. On a quarterly basis, the net profit may clock a decline of 35.3 per cent.

Growth momentum, according to the analysts, could remain below trend with softer individual and corporate growth, keeping net interest margin (NIM) flat despite easing of borrowing costs, they said. That apart, while asset quality may remain steady, some incremental discretionary provisioning likely.

ICICI Securities

Absence of significant profit on investments, and low dividend income of Rs 320 crore YoY could optically make pre-provisioning profit look modest. The PPoP is pegged at Rs 3,671.7 crore for the period under review, compared with Rs 5,284.5 crore in Q2FY20 and Rs 4,805.8 crore in Q1FY21.

Furthermore, the brokerage foresees the net profit declining 54 per cent YoY to Rs 1,811.7 crore during the quarter, while PBT is seen at Rs 1,407.1 crore, down 50 per cent YoY and 37 per cent QoQ.

“Despite elevated morat 2.0 print at 22 per cent, we anticipate less than 5 per cent restructuring. Factoring in home loan disbursements at 95 per cent of Q2FY20 (though conservative on non-individual side), we are building in asset under management (AUM) growth of 9-10 per cent. Also, we expect NIMs to be broadly steady QoQ,” the brokerage said in its preview report.

Kotak Institutional Equities

The brokerage expects HDFC to deliver 12 per cent YoY AUM growth to Rs 5.5 trillion and 9 bps yearly expansion of calculated NIM to 2.43 per cent, reflecting decline in the cost of funds. “We expect retail loan book to remain flat sequentially due to weak new business momentum in the first two months of the quarter, and lower prepayments/balance transfers. Therefore, non-individual loan book will likely deliver 8 per cent QoQ growth on account of lending to high-rated corporate,” it said.

Sharp decline in PAT, at Rs 2,464.3 crore (down 38 per cent YoY and 19 per cent QoQ), will be led by absence of capital gains in Q2FY21 as compared to Rs 1,600 crore in Q2FY20, and 70 per cent YoY decline in dividend income to Rs 320 crore, analysts at the brokerage added.

Phillip Capital

It expects HDFC’s net interest income (NII) to come in at Rs 3,311.2 crore for Q2FY21, up 12.2 per cent from Rs 2,950.4 crore clocked in Q2FY20, but down 0.7 per cent from Rs 3,335.6 crore reported in the June quarter of the current fiscal. NIM is seen remaining flat QoQ at 3.1 per cent.

Optimistically, analysts expect the loan book to clock double-digit growth over the previous year’s quarter driven by the ‘individual’ segment.  They expect spread to remain stable as cost of funds has declined during the quarter. Despite expectations of stable asset quality, they expect HDFC to enhance Stage 1 and 2 provision buffers.

Nirmal Bang Institutional Equities

Like other brokerages, analysts at Nirmal Bang too expect HDFC’s profit to decline on a yearly basis, albeit by 43 per cent, to Rs 2,253.9 crore. Moreover, they estimate NII to rise by 12 per cent YoY and 4 per cent QoQ to Rs 3,346.4 crore for the September quarter of FY21.

While loans and advances are seen advancing nearly 11 per cent YoY (2.5 per cent QoQ) to Rs 4.65 trillion, deposits are pegged at Rs 4.4 trillion, up 13 per cent YoY (2 per cent QoQ).

Consequently, credit cost is seen declining 46 bps sequentially and 12pbps on a yearly basis to 0.6 per cent, while NIM is estimated at 2.9 per cent.