Amid weak sentiment, LIC HF Q2 soothes nerves by beating estimates

PAT up 12% to Rs 5.73 bn in the quarter; bad loans stable

LIC Housing Finance reported a net profit of Rs 5.7 billion for the quarter ended September 30, about 12 per cent higher than the same period a year before. Total income also rose 12 per cent to Rs 42 billion.  

These numbers exceeded the expectation and helped it offset a 13 per cent increase over the year in the cost of funds to Rs 31.4 billion in the quarter. These results, along with a healthy outlook, pushed the stock's price at the day's close to Rs 415.85 on the National Stock Exchange, up 2.6 per cent from Friday.

The loans portfolio grew to Rs 1,760 billion, a year-on-year growth of 10 per cent. Disbursements rose 30 per cent to Rs 142.7 billion. 

Vinay Sah, managing director, said strong growth in the affordable housing segment in both value and volume terms had aided the loan growth. Loans to this section were 13.5 per cent of the total in the quarter. "We expect the trend in disbursal to continue," he said. 
 

A worrying factor is the steep decline in the share of loans to individual borrowers (retail, in sector parlance). This segment accounted for 80 per cent of disbursals, as against 95 per cent a year before. Consequently, the share of developer loans or loans to realtors rose from five per cent in the same quarter a year before to 20 per cent in this one. 
 

Analysts say this is not a positive at all. In fact, with the Street turning cautious on developer loans, it is considered imperative for LIC Housing to check this.

Sah says: "We have not slowed our home loan lending; we saw good traction this quarter, even in builder loans. In the current year, we increased our prime lending rate four times and in total, we passed on 60 basis points of the increased borrowing costs to the customer. Despite the higher interest rates, we have not seen demand for loans come down and, actually, existing borrowers have not felt the pinch that much."
 

The net interest margin (NIM) was 2.35 per cent and asset quality remained under control. The NIM was 2.34 per cent in the June quarter and 2.38 per cent a year before. Siddharth Purohit of SMC Capital believes the December quarter will be the true test for profit since it would be the first full one to feel the impact of rising interest rates.
 

Gross non-performing assets stood at 1.2 per cent of advances at the end of the quarter, from 1.21 per cent at the end of June. It was 0.8 per cent a year before.

There is Rs 11.5 billion in cash and equivalent, Rs 1,252 billion in (liable) debt securities and Rs 264.9 billion in borrowing. The management says its liquidity position is stable. Around 70 per cent of the debt securities are in non-convertible debentures. The rest is in commercial paper and other instruments.

In August, the board of directors had announced a dividend of Rs 6.8 on each equity share, of a face value of Rs 2 each.