Mumbai, Maharashtra, India
The Board of Directors of Housing Development Finance Corporation Limited (HDFC) announced its unaudited standalone and consolidated financial results for the first quarter of the financial year 2016-17, following its meeting on Wednesday, July 27, 2016 in Mumbai. The accounts have been subjected to a limited review by the Corporation’s statutory auditors in line with the regulatory guidelines.
STANDALONE FINANCIAL RESULTS
For the quarter ended June 30, 2016, the profit before tax stood at Rs. 2,700 crore as compared to Rs. 1,952 crore in the corresponding quarter of the previous year, representing a growth of 38%. This includes the profit on sale of part of its stake in HDFC ERGO General Insurance Company.
After providing Rs. 829 crore for tax, (inclusive of Rs. 90 crore as Deferred Tax Liability on Special Reserve), the profit after tax stood at Rs. 1,871 crore as compared to Rs. 1,361 crore in the previous year, representing a growth of 37%.
Sale of Equity Shares of HDFC ERGO General Insurance Company (HDFC ERGO)
During the quarter, the Corporation concluded the 22.9% stake sale in HDFC ERGO to ERGO International AG. The pre-tax profit was Rs. 922 crore. As HDFC ERGO is an unlisted entity, the capital gains tax on the sale of shares was Rs. 197 crore, resulting in a post tax profit of Rs. 725 crore.
In accordance with past practice and with the objective of further strengthening the Corporation’s balance sheet, the Corporation utilised the above-mentioned one-off pre-tax gains to shore up the Provision for Contingencies Account and thereby build an additional buffer against any unexpected risk in the future. Accordingly, during the quarter, the Corporation made an additional provision of Rs. 275 crore against standard assets and other contingencies.
As at June 30, 2016, the total assets of HDFC stood at Rs. 3,00,302 crore as against Rs. 2,57,739 crore as at June 30, 2015 – an increase of 17%.
Individual loan disbursements grew by 26% during the quarter. The average size of individual loans stood at Rs. 25.3 lac.
As at June 30, 2016, total Assets Under Management (AUM) stood at Rs. 3,01,476 crore, of which the loan book was Rs. 2,65,731 crore and outstanding loans sold/assigned was Rs. 35,745 crore.
During the quarter, Rs. 3,296 crore was assigned to HDFC Bank pursuant to the buyback option embedded in the home loan arrangement between the Corporation and HDFC Bank and Rs. 1,812 crore was assigned/securitised to other banks. In respect of the loans assigned/securitised to the banks other than HDFC Bank, the residual interest is 2% per annum. The residual income on these loans is being recognised over the life of the underlying loans and not on an upfront basis.
Total loans sold during the preceding twelve months was significantly higher at Rs. 14,011 crore as against Rs. 10,949 crore in the previous year.
The growth in the individual loan book, after adding back loans sold in the preceding 12 months was 25% (16% net of loans sold). The non-individual loan book grew at 12%. The growth in the total loan book after adding back loans sold was 21% (15% net of loans sold).
On an Assets under Management (AUM) basis, the growth in the individual loan book was 18% and the non-individual loan book was 12%. The growth in the total loan book on an AUM basis was 16%.
Gross non-performing loans as at June 30, 2016 amounted to Rs. 2,006 crore. This is equivalent to 0.75% of the loan portfolio. The non-performing loans of the individual portfolio stood at 0.59% while that of the non-individual portfolio stood at 1.11%.
As per NHB norms, the Corporation is required to carry a total provision of Rs. 1,979 crore of which Rs. 1,370 crore is against standard assets.
The balance in the provision for contingencies account as at June 30, 2016 stood at Rs. 3,025 crore of which Rs. 557 crore is on account of non-performing loans. This balance in the provision for contingencies is equivalent to 1.14% of the portfolio.
Spread and Net Interest Margin
The spread on loans over the cost of borrowings for the quarter ended June 30, 2016 stood at 2.26% compared to 2.29% for the year ended March 31, 2016. The spread on the individual loan book was 1.92% and on the non-individual book was 3.06%.
Net Interest Margin for the quarter ended June 30, 2016 was 3.8%.
As at June 30, 2016, the unrealised gains on HDFC’s listed investments amounted to Rs. 64,375 crore (previous year Rs. 57,958 crore). This excludes the appreciation in the value of unlisted investments.
CAPITAL ADEQUACY RATIO
The Corporation’s capital adequacy ratio stood at 16.5%, of which Tier I capital was 13.1% and Tier II capital was 3.4%. Deferred tax liability on Special Reserve and the investment in HDFC Bank has been considered as a deduction in the computation of Tier I capital. As per the regulatory norms, the minimum requirement for the capital adequacy ratio and Tier I capital is 12% and 6% respectively.
HDFC’s distribution network spans 409 outlets which include 121 offices of HDFC’s distribution company, HDFC Sales Private Limited (HSPL). HDFC covers additional locations through its outreach programmes. Distribution channels form an integral part of the distribution network with home loans being distributed through HSPL, HDFC Bank Limited and third party direct selling associates.
To cater to non-resident Indians, HDFC has offices in London, Dubai and Singapore and service associates in Kuwait, Oman, Qatar, Abu Dhabi and Saudi Arabia.
CONSOLIDATED FINANCIAL RESULTS
For the quarter ended June 30, 2016, the consolidated profit after tax stood at Rs. 2,797 crore as compared to Rs. 2,204 crore in the corresponding quarter last year, representing a growth of 27%.