Though growth was lagging, HDFC’s bottom line got a booster shot thanks to the stake sale in Gruh Finance, which fetched a windfall gain of Rs 1,895 crore.
The June quarter was a mixed bag for the private lender. While individual loan growth remained steady, bad loans in the non-retail segment rose sharply, developer loans were in a spot of bother and caution was spread all over within the non-retail loan book. Still, brokerages are bullish. “HDFC has better underwriting skills, strong distribution and cost of funds advantage to tide over this phase,” noted Jefferies India. Gross loans grew at 11.2 per cent, individual retail loans at over 15 per cent, non-individual loans at a mere 1.5 per cent growth.
Loan AUM as on June, 2019 stood at Rs 4.7 lakh crore, registering a near 13 per cent growth over last year, while individual loan growth was steady at about 16 per cent. This, along with lower corporate spreads, even as the individual spread was steady, impacted revenue momentum.
HDFC remained cautious on the corporate, developer loans given the unfavourable lending environment, tighter liquidity conditions over-leveraged and corporate debt rating downgrades leading to heightened risks across the developer/construction finance segment. Stage 3 assets increased to 1.5 per cent; gross bad loans during the quarter were up 1.29 per cent.
GNPA in the developer loan segment worsened, while that in the individual segment remained stable. Overall, AUM growth softened to below trend at 12 per cent, following the bank’s conservative stance in the corporate segment, given weak real estate sentiment.
Asset quality was steady in individual segment, though it rose in the corporate segment, led by recognition of Jet Airways’ exposure worth Rs 400 crore. The bank is in the process of auctioning the airline’s property and is currently undergoing resolution under the NCLT.
It provided for Rs 120 crore on Jet with Rs 140 crore of contingency provisioning on housing loans having subvention scheme. This eventually led to higher credit costs. While real estate sentiment is tepid, HDFC has historically managed risk effectively.
“Amid the prevailing systemic risk aversion, growth will consolidate in favour of strong players...,” said Edelweiss Securities.