HDFC in focus as Q1 numbers beat estimates. Asset quality deteriorated but restructured numbers remained flat sequentially. Keki Mistry, Vice Chairman and CEO shared the earnings fineprint with CNBC-TV18.

The net interest margin for the company were at a 13-quarter high. Mistry said the expansion in net interest margins was due to two factors. One, was because they brought down the surplus liquidity. Last year the surplus liquidity was Rs 32000 crore and this year the average surplus liquidity is Rs 15,225 crore. So that should have released some amount of liquidity which could have earned higher return.

In addition to this Rs 15225 crore, we are also carrying another Rs 9200 crore into investment in government securities. This investment in government securities gives us slightly higher yields than investment in liquid fund, said Mistry. Combination of this could have led to higher NIMs.

Secondly, our liabilities also keep maturing on continuous basis and as old liabilities get matured they get replaced by new liabilities, which come in at lower cost, which to some extent help margins, he added.

He said demand is seen across the board and not specific to tier I, tier II towns. Also average loan size for them has gone up compared to last year, which in the first quarter was to the tune of Rs 30,90,000.

“There was an impact on disbursements in the second half of April and whole of May but things started normalising in June and in July it was back. Our individual retail disbursements in the month of July were third highest in HDFC’s history and highest ever in the non-quarter month,” he said, adding that July disbursements on a sequential basis compared to June were 14 percent higher and June on sequential basis compared to May was 79 percent higher.

“If we compare July of 2021 to July of 2020, we have 68 percent growth in disbursement for individuals,” said Mistry.

Talking about the reasons for NPLs slippage, he said physical contact with customers was not possible because of the concern for the welfare of their staff and secondly because societies or offices would not allow company staff to meet them. Moreover, various courts also said in these difficult times it would not be right to take legal action against customers. However, once things normalise, this inability to contact customers or take legal action would go away and then the NPLs would start coming back to pre-covid levels, he said.

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On normalisation of credit cost, he said, they have been extremely proactive in provisioning and have provided in anticipation of risk. We are carrying provision which is 128% higher than we are required to carry. We would not like to release any of the provisioning that we have done until we are certain that we have seen last of COVID and things have normalised in system.

For the entire interview, watch the accompanying video

(Edited by : Aditi Gautam)

First Published:Aug 2, 2021 6:52 PM IST