Consumer financier Bajaj Finance Ltd. on Wednesday reported a drop in net income as the lender set aside a larger amount as provisions against stressed assets.
Net profit fell to Rs 965 crore for the quarter ended September 30, down 36% from a year ago, according to a swap document. The non-bank finance company had reported a net profit of Rs 962 crore in the quarter ended June 30. Profit was slightly above Bloomberg’s estimate of Rs 945 crore.
Total income increased 3% year-on-year to Rs.6,523 crore. Bajaj Finance’s net interest income, or income base, reached Rs 4,105 crore, up 4% from a year ago.
Consolidated assets under management reached Rs 1.37 lakh crore at the end of the July-September quarter, against Rs 1.38 lakh crore in the previous quarter. Bajaj Finance owns a 100% interest in Bajaj Housing Finance Ltd., which is considered in consolidated assets under management.
Loan losses and provisions for the July-September quarter stood at Rs 1,700 crore, up from Rs 594 crore a year ago.
Due to the ongoing pandemic, the company further increased its provisions on stage 1 and 2 assets from Rs 1,306 crore to Rs 4,879 crore as of September 30 from Rs 3,573 crore as of June 30, said Bajaj Finance. Stage 1 assets are those that are late by up to 30 days, stage 2 assets include those that are 30 to 90 days late. Stage 3 assets are over 90 days overdue.
- The gross ratio of non-performing assets stood at 1.03%, down 37 bps from 1.4% at June 30.
- Amounts classified as special mention or overdue accounts, for which the moratorium or postponement has been extended, amounted to Rs 2,127.70 crore.
- Accounts for which the asset classification benefit was extended as part of the RBI’s unique restructuring plan stood at Rs 1,917.87 crore as of September 30.
- In addition, according to the Supreme Court’s interim instructions, the lender did not classify the accounts as NPA after August 31. If the Company had classified borrowers’ accounts as NPA after August 31, 2020, the ratio of gross NPA to net NPA would have been 1.34%. and 0.56% respectively, he said.
Selective loan growth
While Bajaj Finance saw a slight increase in consolidated assets under management during the quarter, it continued a selective lending approach.
The stock of consumer and rural loans in the business-to-business category fell 19% each, year-on-year. Bajaj Finance’s trade credit activity also contracted by 11% compared to last year. In contrast, mortgage loans increased by 14% a year ago.
According to Bajaj Finance’s investor presentation:
- In September, loan disbursements represented 62% of last year’s volumes.
- Urban consumer businesses (B2B) were 72%, rural consumer businesses (B2B) 91%.
- Credit card issuance was 73%; 75% electronic commerce; car financing at 54% of last year’s activity.
- The company plans to reach pre-Covid loan origination levels by March 21 / April.
Deposits, which constitute around 17% of consolidated borrowings and 22% of Bajaj Finance’s stand-alone borrowings, stood at Rs 21,669 crore at the end of the second quarter, up 23% year-over-year.
Liquidity and capital
The lender remained comfortable in terms of liquidity and capital.
The solvency ratio stood at 26.64% at the end of September. Category I capital amounted to 23.01%.
The excess liquidity as of September 30, 2020 stood at Rs 22,414 crore against Rs 8,107 crore a year ago.