LIC housing arm beats Street

Net profit rises by 12% to ~5.7 bn; total income also up at the same rate to ~42 bn

LIC Housing Finance reported a net profit of ~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 ~42 billion.

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

The loans portfolio grew to ~1,760 billion, a year-on-year growth of 10 per cent. Disbursements rose 30 per cent, to ~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 worry factor is 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 this 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; 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 ~11.5 billion in cash and equivalent, ~1,252 billion in (liable) debt securities and ~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 ~6.8 on each equity share, of a face value of ~2 each.