|
| LIC Housing: Room to grow |
| Shobhana Subramanian / Mumbai Nov 11, 2009, 00:37 IST |
|
Although cost of funds came down, yields on loans weren’t high enough for LIC Housing Finance to post an increase in margins in the September 2009 quarter. The firm’s net interest margin stayed sequentially flat at 2.45 per cent while showing a slight fall year-on-year.
 With margins flat in the September 2009 quarter, rise in net interest income was only 9 per cent. It was partly a write-back of excess provisioning of close to Rs 41 crore that helped the home loan company report a 27 per cent increase in net profit at Rs 170 crore.
The margins are a bit of a disappointment because the company would have enjoyed the benefit of Rs 658 crore that it raise recently through a placement to institutions. However, a few months ago, the company effected a 50 basis points cut in the prime lending rate, which appears to have impacted yields.
Of course, since there is enough liquidity in the system, competition in the market is keen. LIC Housing’s cost of borrowings are expected to come down further from the current levels of around 8.5 per cent now that the incremental cost of resources is estimated at around 7.5 per cent.
Should yields sustain at these levels, margins should improve in the coming months given that business is brisk with approvals rising 82 per cent and disbursements rising 74 per cent during the quarter. As a result, the loan book currently stands at close to Rs 32,000 crore with individual loans dominating.
Also, the book is clean with share of non-performing loans having fallen to 1.28 per cent from 1.51 per cent in the June quarter. LIC Housing has enough capital and plans to grow its loan book by 40 per cent in the current year — the growth in the September 2009 quarter was 32 per cent.
Analysts estimate that net profits could grow 24 per cent compounded over 2009-2011. At the current price of Rs 744/879, however, the stock trades at 2 times 2010-11 adjusted price to book value and is not cheap.
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
