HDFC Ltd Standalone Financial Results for the Quarter Ended June 30, 2018

Business Wire India PERFORMANCE HIGHLIGHTS

• 18% growth in the overall loan book on an Assets Under Management (AUM) basis for the quarter ended June 30, 2018
• 25% growth in individual loans (after adding back loans sold in the preceding 12 months) 
• 37% of home loans approved in terms of numbers during the quarter are towards the Economically Weaker Section & Low Income Group
• 20% growth in Net Interest Income 
• Spreads at 2.28%, Net Interest Margin at 3.5% 
• Under Ind AS, Profit After Tax (Before Other Comprehensive Income) stood at Rs 2,190 crore (Previous Year: Rs 1,424 crore) 

The Board of Directors of Housing Development Finance Corporation Limited (HDFC) announced its unaudited financial results for the quarter ended June 30, 2018, following its meeting on Monday, July 30, 2018 in Mumbai. The accounts have been subjected to a limited review by the Corporation’s statutory auditors in line with the regulatory guidelines.   TRANSITION TO Ind AS   In accordance with the notifications issued by the Ministry of Corporate Affairs and National Housing Bank, the Corporation has adopted the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS) notified under Section 133 of the Companies Act, 2013 with effect from April 1, 2018.    For the quarter ended June 30, 2018, the Corporation has adopted Ind AS for its standalone financials. The comparative Statement of Profit and Loss for the quarter ended June 30, 2017 is based on the erstwhile Indian Generally Accepted Accounting Principles (Previous GAAP). This has been restated to meet Ind AS requirements.

The effective date of transition to Ind AS is April 1, 2017.   The summary of the reconciliation of the Net Profit as reported under the erstwhile Indian GAAP and Ind AS is given in the Annex.   FINANCIAL RESULTS   Financials for the quarter ended June 30, 2018   The profit before tax, dividend and sale of investments for the quarter ended June 30, 2018 stood at Rs 2,484 crore compared to Rs 1,960 crore in the corresponding quarter of the previous year, representing a growth of 27%.    For the quarter ended June 30, 2018, the Corporation received dividend of Rs 511 crore from HDFC Bank Limited, while in the previous year, dividend from HDFC Bank was received in the second quarter.    The profit before tax for the quarter ended June 30, 2018 stood at Rs 3,070 crore compared to Rs 2,022 crore in the corresponding quarter of the previous year.    The reported profit after tax before other comprehensive income as per Ind AS for the quarter ended June 30, 2018 stood at Rs 2,190 crore compared to Rs 1,424 crore in the corresponding quarter of the previous year, representing an increase of 54%.    LENDING OPERATIONS   Focus on Affordable Housing   In support of the government’s flagship scheme, ‘Housing For All’, the Corporation has increased its efforts towards loans to the Economically Weaker Section (EWS) and Low Income Group (LIG).   During the quarter ended June 30, 2018, 37% of home loans approved in volume terms and 19% in value terms have been to customers from the EWS and LIG segment.   The Corporation on an average has been approving ~ 8,300 loans on a monthly basis to the EWS and LIG segment, with monthly such average approvals at approximately Rs 1,346 crore.    The average home loan to the EWS and LIG segment stood at Rs 10.1 lac and Rs 17.6 lac respectively.   The Corporation has been recognised by the Ministry of Housing and Urban Affairs for its contribution towards the Pradhan Mantri Awas Yojana’s Credit Linked Subsidy Scheme (CLSS) for the second consecutive year. On July 29, 2018, the Honourable Prime Minister, Shri Narendra Modi presented an award to the Corporation for being the best performing primary lending institution in the EWS & LIG segment and the second best in the MIG segment of the CLSS.   Overall Lending Operations   Total individual loan disbursements grew by 17%. The average size of individual loans stood at Rs 26.7 lac.    On an Assets under Management (AUM) basis, the growth in the individual loan book was 18% and the non-individual loan book was 17%. The growth in the total loan book was 18%.   As at June 30, 2018, individual loans comprise 72% of the AUM.   As at June 30, 2018, the loan book stood at Rs 371,988 crore as against Rs 3,13,573 crore in the previous year.   During the quarter, the Corporation sold individual loans amounting to Rs 9,714 crore (PY: 2,922 crore). All the loans assigned during the quarter were to HDFC Bank pursuant to the buyback option embedded in the home loan arrangement between the Corporation and HDFC Bank. Income on these loans will continue to be recognised over the life of the loan.   The increase in the amount of loans assigned to HDFC Bank was due to the fact that no loan assignments were done to HDFC Bank since August 2017. Thus, the entire loan assignments during the quarter ended June 30, 2018 pertained to the backlog under the arrangement.   Total loans sold during the preceding twelve months was Rs 13,245 crore as against Rs 13,841 crore in the previous year.   As at June 30, 2018, the outstanding amount in respect of individual loans sold was Rs 46,810 crore. HDFC continues to service these loans and is entitled to the residual income on the loans sold. The residual income on the individual loans sold stood at 1.25% per annum and is being recognised over the life of the loans.   The growth in the individual loan book, after adding back loans sold in the preceding 12 months was 25% (19% net of loans sold). The non-individual loan book grew at 18%. The growth in the total loan book after adding back loans sold was 23% (19% net of loans sold).    Non-Performing Assets (NPAs)   Under Ind AS, the Corporation’s assets have been classified as follows based on Exposure at Default:

• Stage 1: Performing Assets
• Stage 2: Under Performing Assets
• Stage 3: (a) Performing but identified as assets having some degree of stress; (b): Non-Performing Assets

Under Ind AS, asset classification and provisioning moves from the ‘rule based’, incurred losses model to the Expected Credit Loss (ECL) model of providing for expected future credit losses. Thus, loan loss provisions are made on the basis of the Corporation’s historical loss experience, future expected credit loss and after factoring in various macro-economic parameters. (For further details, refer to Statement on Analysis of HDFC’s Transition to Ind AS).

As per NHB norms, the gross non-performing loans as at June 30, 2018 stood at Rs 4,409 crore. This is equivalent to 1.18% of the loan portfolio. The non-performing loans of the individual portfolio stood at 0.66% while that of the non-individual portfolio stood at 2.32%.   As per National Housing Bank norms, the Corporation is required to carry a total provision of Rs 3,006 crore.   As against this, the balance in the Provisions and Loan Losses Account as at June 30, 2018 stood at Rs 4,758 crore. This is equivalent to 1.27% of the loan portfolio.   Net Interest Income   The net interest income for the quarter ended June 30, 2018 stood at Rs 2,890 crore compared to Rs 2,412 crore in the corresponding quarter of the previous year, representing a growth of 20%.   Spread and Margin   The spread on loans over the cost of borrowings for the quarter ended June 30, 2018 stood at 2.28%. The spread on the individual loan book was 1.91% and on the non-individual book was 3.14%.   Net Interest Margin stood at 3.5%.

INVESTMENTS

As at June 30, 2018, the unaccounted gains on listed investments in subsidiary and associate companies amounted to Rs 1,68,000 crore.

COST INCOME RATIO   For the quarter ended June 30, 2018, the cost to income ratio excluding expenses on employee stock option scheme pursuant to Ind AS and spend on corporate social responsibility stood at 9.8%.   CAPITAL ADEQUACY RATIO   The Corporation’s capital adequacy ratio stood at 16.3%, of which Tier I capital was 15.0% and Tier II capital was 1.3%. As per the regulatory norms, the minimum requirement for the capital adequacy ratio and Tier I capital is 12% and 6% respectively.

DISTRIBUTION NETWORK   HDFC’s distribution network spans 491 outlets which include 159 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 the Middle East.                                                         Annex   Summary of the reconciliation of the Net Profit as reported under the erstwhile Indian GAAP and Ind AS:  

Source: Businesswire