India's Bajaj Finance misses Q2 profit view on higher bad loan provisions

BENGALURU (Reuters) -Indian non-bank lender Bajaj Finance reported a smaller-than-expected rise in second-quarter profit on Tuesday, as provisions for bad loans increased.

The company's consolidated profit after tax rose nearly 28% to 35.51 billion rupees ($430.8 million) in the three months ended September 2023, missing analysts' average estimate of 35.85 billion rupees, according to LSEG data.

Consolidated numbers include the businesses of the lender's subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities.

Loan losses and provisions grew nearly 47% year-on-year in the quarter to 10.77 billion rupees, up from 7.34 billion rupees a year ago.

Additionally, the company's gross non-performing asset ratio deteriorated to 0.91% at the end of September, from 0.87% at the end of June.

Lenders have been expanding their unsecured lending portfolio - personal loans and credit card spends that do not carry collateral and pose a higher risk - as the pandemic-induced stress on household finances began easing.

The RBI has been cautioning lenders about nascent stress in this segment, urging them to adopt stronger risk management practices.

Demand for loans stayed strong, with new loan bookings climbing 26% year-on-year in the quarter, while deposits book jumped 39%. This came despite the Reserve Bank of India (RBI) keeping its key lending rate steady for a fourth consecutive policy meeting. It has raised interest rates by 250 basis points since May 2022.

Net interest income, the difference between interest earned on loans and paid on deposits, rose over 26% to 88.45 billion rupees, while interest income jumped nearly 38%.

The Pune, Maharashtra-based company's assets under management (AUM) rose 7.5% sequentially to 2.90 trillion rupees.

The demand for loans has facilitated heated competition within the sector with the entry of Jio Financial Services (JFS), carved out of billionaire Mukesh Ambani's Reliance Industries.

JFS had, on Monday, said its second quarter profit doubled sequentially, reporting earnings for the first time since it was listed on stock exchanges.

Shares of Bajaj Finance ended 0.7% higher ahead of its results.

($1 = 83.2145 Indian rupees)

(Reporting by Varun Vyas in Bengaluru; Editing by Janane Venkatraman)