LIC Housing Finance posted lower-than-expected results for the September quarter due to dwindling loan growth and lower margins. Not surprisingly, the stock ended flat at Rs 242.95 at the Bombay Stock Exchange (BSE) on Wednesday.
The net profit growth of 147 per cent year-on-year in the recently concluded quarter appears healthy, given the previous corresponding period’s growth, which was impacted by a steep rise in provisions for bad loans to comply with the change in provisioning requirements of the National Housing Board (NHB).
Loan growth, however, was in-line with Street expectations (23 per cent YoY growth), but this was LIC Housing Finance’s lowest loan growth since the June 2010 quarter (when loans grew by 36.8 per cent). Notably, this metric has fallen every quarter since June 2010 – with the September quarter following the same trend. This is in sharp contrast to its larger peer, HDFC, which was able to maintain its loan growth between 19-22 per cent in the same period.
| IMPROVING PROFITABLY | ||
| In Rs crore | Q2'FY13 | FY13E |
| Net interest income | 354 | 1,654 |
| % chg yoy | 6.0 | 18.9 |
| Total income | 1,862 | 1,909 |
| % chg yoy | 22.9 | 17.6 |
| NIM (%) | 2.1 | 2.5 |
| Bps chg yoy | -40 | - |
| Bps chg qoq | -8 | NA |
| Net profit | 243.1 | 1,102 |
| % chg yoy | 147.0 | 20.5 |
| Gross NPA (%) | 0.6 | 0.7 |
| P/BV (x) | - | 1.9 |
| Loan Growth (%) | 23.0 | 23.9 |
| E: Estimated Source: Company, analyst reports | ||
The moderation can be attributed largely to falling corporate disbursements in this period.
Corporate disbursements fell 62 per cent sequentially to Rs 121 crore and 71 per cent when compared to the September 2011 quarter.
In the September 2012 quarter, the individual loan growth also came off to 21 per cent from 29 per cent in the June 2012 quarter. Consequently, the net interest income came in lower than analysts’ expectations. For this year though, analysts expect loan growth to remain at 23 per cent.
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Margins
As against an expectation of improvement, the net interest margins (NIMs) contracted by eight basis points (bps) sequentially to 2.1 per cent. However, easing cost of funds provided some cushion to margins in the quarter.
LIC Housing Finance Director and Chief Executive V K Sharma, said “It is encouraging to note that there is a 10 per cent increase in the number of customers, which is a very good sign. The other good indication is that the incremental cost of funds is showing some trends of easing.”
Notably, the company had indicated that loans worth Rs 2,500 crore (under the Fix-O-Floaty product) will be re-priced in the upward direction in the September quarter, pushing margins up. But, there is no clarity on the same in the results.
Notes Varun Varma, banking analyst at Angel Broking, “LIC Housing Finance results were below expectations. We will need more clarity from the management on the amount of loans re-priced in the September quarter.
Lower corporate disbursement is another factor that has hit the net interest margins. We will closely watch the margin and corporate disbursement trends in the next two quarters.”
Asset quality remained strong for the quarter gone by as gross non-performing assets (NPA) improved to 0.60 per cent versus 0.64 per cent year before. Though the net NPAs inched up to 0.28 per cent versus 0.12 per cent earlier, the sequential fall of 84 per cent in provisioning to Rs 694 crore is an indication of improving asset quality.