HDFC likely to report 6% fall in net profit on lower dividends, investment income

MUMBAI: Housing Development Finance Corporation is likely to report a 6.4 per cent year-on-year decline in net profit to Rs. 2,856 crore for the quarter ended June due to disruption caused by the second wave of the COVID-19 pandemic.

The company’s bottomline will also suffer from a sharp decline in investment income and dividend income during the quarter. Gross dividend income in the June quarter was at Rs. 16 crore as against Rs. 298 crore a year ago, HDFC had said in its quarterly update earlier this month.

The non-bank lender will report its June quarter earnings on Monday.

The housing finance giant is expected to report a growth of more than 38 per cent year-on-year in net interest income to Rs. 4,115 crore, according to an average of estimates by 10 brokerage polled. The likely strong growth in net interest income for the company is a result of a low base in the year-ago quarter, which was affected by national lockdown.

On the operating front, analysts expect a steady quarter for the company as cost of funds most likely declined from the year-ago quarter. The non-bank lender is expected to report 12-22 per cent on-year growth in pre-provision operating profit.

Brokerage firm ICICI Securities expects provisions in the quarter to rise to reflect the impact of the second wave during the quarter. The brokerage expects provisions to rise at 90 basis points from 40 basis points in the previous three quarters.

Besides the June quarter earnings, all eyes will be on the company’s asset quality performance especially in the corporate loan book. Further, investors will seek insights on the demand environment and recovery in loan disbursements.

Shares of HDFC ended 1.2 per cent higher at Rs. 2,442.6 on the National Stock Exchange.