Bajaj Finance Q2 profit declines 36% to Rs 965 crore, NII growth beats estimates at 4%

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NBFC major Bajaj Finance on October 21 reported a huge 36 percent decline in consolidated profit for the quarter ended September 2020 due to elevated provisions.

Profit fell to Rs 965 crore during the quarter, down from Rs 1,506 crore in same period last year.

Consolidated net interest income increased 4 percent to Rs 4,165 crore in Q2FY21 year-on-year, which was better than the CNBC-TV18 poll estimates of Rs 3,711.7 crore.

During the quarter, as a measure of prudence, the company said it had reversed capitalised interest of Rs 142 crore. The total amount of interest income reversed in H1 FY21 was Rs 361 crore.

Consolidated assets under management at Rs 1.37 lakh crore grew by 1.1 percent YoY in Q2FY21, while new loans booked during September quarter were 3.62 million as against 6.47 million in same period last year, company said in its BSE filing.

Consolidated earnings included results of subsidiaries Bajaj Housing Finance and Bajaj Financial Securities.

"Liquidity surplus as of September 2020 stood at Rs 22,414 crore as against Rs 8,107 crore as of September 2019. The cost of liquidity surplus for Q1 FY21 was approximately Rs 220 crore as against Rs 47 crore in Q2 FY20. The company's liquidity position remains very strong," Bajaj Finance said.

Its loan losses and provisions for September quarter was Rs 1,700 crore, nearly trebled compared to Rs 594 crore in corresponding period previous fiscal.

Consequent to the ongoing pandemic, the company said it had further increased its provisions on stage 1 and 2 assets by Rs 1,370 crore to Rs 5,099 crore as of September 2020 as against Rs 3,729 crore as of June 2020. The company has strong pre-provisioning profitability to manage loan losses arising out of COVID-19, it added.

The provisioning coverage ratio as of September 2020 was 64 percent against 65 percent in June quarter.

"Provisioning coverage on stage 1 and 2 assets was 369 bps as of September 2020 versus 273 bps as of June 2020 and as against 90-100 bps during pre-pandemic situation," company said.

On the asset quality front, gross non-performing assets (NPA) as a percentage of gross advances fell 37 bps sequentially to 1.03 percent in Q2FY21, while net NPA was down 13 bps to 0.37 percent QoQ.

After the Supreme Court order, the company has not classified any accounts which were not NPA as of August 31, 2020, as per RBI norms, as NPA after August 31, 2020. If the company had classified borrower accounts as NPA after August 31, 2020, the company's gross NPA and net NPA ratio would have been 1.34 percent and 0.56 percent respectively, Bajaj Finance said.

The stock corrected 3.8 percent to trade at Rs 3,138.45 on the BSE at 14:25 hours IST.