 "LIC Housing Finance: Strong all-round growth")
Strong growth in individual as well as developer loans helped LIC Housing Finance (LIC HF) post better-than-expected numbers for the September quarter. While loans to individuals grew by 16.8 per cent to Rs 1,11,076 crore, developer loans, which have witnessed a decline or flattish loan growth over the past eight quarters, grew 25 per cent year-on-year to Rs 2,993 crore. The strong rebound in the latter was on account of a 80 per cent increase in disbursements in the June quarter. Sunita Sharma, managing director and chief executive, says, "Apart from improving demand condition, the high growth is also a function of low base and developers taking (loans) to finish some incomplete projects."
Thus, overall, the loan book grew at a healthy clip of 17 per cent to Rs 114,069 crore. The performance, though in line with recent trends, is good, given the benign environment. Led by loan growth, net interest income grew 34.8 per cent year-on-year to Rs 717 crore, the highest rate witnessed by the company over the past eight to nine quarters.
Asset quality has improved further in the quarter. While provisions appear higher on a year-on-year basis, given that there was a provision writeback in the base quarter, sequentially, provisions have fallen 32 per cent. The gross and net non-performing assets ratios thus improved marginally on a sequential basis. All these indicate that incremental stress has been rather insignificant.
With cost of funds falling more than the yield on customer advances, net interest margin improved 33 basis points year-on-year to 2.56 per cent. A fall in other income by a fifth to Rs 25 crore, with a rise in tax rate to 36.1 per cent (34 per cent earlier), restricted net profit growth in the quarter. But, profits grew by a strong 21 per cent to Rs 412 crore, ahead of Bloomberg consensus estimate of Rs 405 crore.
But, for the stock, near-term gains may be limited. It trades at 2.3 times FY17 estimated book value and appears fairly valued, given an average target price of Rs 524 of analysts polled by Bloomberg in October.
Thus, overall, the loan book grew at a healthy clip of 17 per cent to Rs 114,069 crore. The performance, though in line with recent trends, is good, given the benign environment. Led by loan growth, net interest income grew 34.8 per cent year-on-year to Rs 717 crore, the highest rate witnessed by the company over the past eight to nine quarters.
Asset quality has improved further in the quarter. While provisions appear higher on a year-on-year basis, given that there was a provision writeback in the base quarter, sequentially, provisions have fallen 32 per cent. The gross and net non-performing assets ratios thus improved marginally on a sequential basis. All these indicate that incremental stress has been rather insignificant.
With cost of funds falling more than the yield on customer advances, net interest margin improved 33 basis points year-on-year to 2.56 per cent. A fall in other income by a fifth to Rs 25 crore, with a rise in tax rate to 36.1 per cent (34 per cent earlier), restricted net profit growth in the quarter. But, profits grew by a strong 21 per cent to Rs 412 crore, ahead of Bloomberg consensus estimate of Rs 405 crore.
But, for the stock, near-term gains may be limited. It trades at 2.3 times FY17 estimated book value and appears fairly valued, given an average target price of Rs 524 of analysts polled by Bloomberg in October.