Q3 PAT dipped 8% y-o-y to Rs 3.4 billion, 13% below our estimate as higher provision negated lower costs. Disbursal declined sharply due to demonetisation.
Q3 PAT dipped 8% y-o-y to Rs 3.4 billion, 13% below our estimate as higher provision negated lower costs. Disbursal declined sharply due to demonetisation. Asset quality deteriorated, despite SHTF applying RBI dispensation. Disbursal is improving but operating environment remains tough. GNPA could rise further in Q4 as overdue assets on which RBI forbearance was applied may partly become NPA in Q4. However, valuation at 2.1x ABV may offer downside support. Retain hold.
SHTF’s PPOP grew 15% y-o-y to R11.4 billion (7% beat). NII grew 8.6% y-o-y, 3% ahead of our estimate, but fall in operating expenses owing to lower headcount (-8% y-o-y), led to PPOP beat. Credit costs jumped 93bps Q-o-Q, resulting in lower than expected profit. Loan loss provision jumped 45% y-o-y to R6.1billion and credit costs rose 93bps q-o-q to 3.9% due to demonetisation. SHTF utilised RBI dispensation on NPA recognition.
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GNPA (150DPD) for Q3 was at 6.62%, largely flat vs 6.5% Q2FY17. In absence of RBI dispensation, GNPA would have been higher at 7.32%. Collection efficiency had been hit due to demonetisation.
Delinquencies were higher in smaller ticket size segments as per SHTF. We believe GNPA could rise further in Q4 as a) part of overdue accounts on which RBI dispensation has been applied could become NPA; b) transition to 120dpd NPA recognition in Q4 could increase GNPA by 1%.