LIC Housing Finance Q1: Rise in non-performing assets a cause for concern

Bad loans or gross non-performing assets (NPA) as a percentage of gross advances rose to 1.21% in Q1 from 0.72% a year back and 0.78% as of March 2018

LIC Housing Finance continued to face margin pressures even in the June-2018 quarter (Q1) amid high cost of funds and inability of the company to pass the additional cost to end consumers due to stiff competition. 

The company’s net interest margin or NIM contracted by 18 basis points to 2.34 per cent. Bond market pressure during the quarter pushed up the company’s finance costs by 12 per cent year-on-year. 

The company’s major chunk of borrowings is in the form of non-convertible debentures (NCDs), comprising 79 per cent of borrowings in Q4FY18. 

Thus, NII (a difference between interest earned and expenses) went up just