Mortgage lender LIC Housing Finance Ltd’s December quarter numbers give an indication of the demand for housing during the period. Seen in that light, sanctions during the quarter rose by just 15% year-on-year, compared with the 30% increase in the September quarter.
Similarly, disbursements were higher by 18%, much less than the 35% growth during the September quarter. Mortgages outstanding rose by 5% during the December quarter, over the end-September level.
In short, the company’s tepid loan growth clearly reflects the extent of the slowdown in housing in the last quarter.
That said, LIC Housing Finance’s profits before tax during the quarter were up a hefty 37%. How did that happen? Well, higher “other income” and “other operating income” were reasons, as were lower provisions (net of writebacks).
But perhaps the main reason was a large rise in margins. Net interest margin improved to 3.23% during the December quarter, compared with a much lower 2.92% in the September quarter. That was the reason net income was so high.
The real good news is that asset quality has improved. Gross non-performing assets, or NPAs, went down to 1.69% from 1.85% at the end of September, while net NPAs were down to 0.73%, well below end-September’s 1.65%. Bad loans had gone up in the first two quarters of the fiscal year and their reduction in the December quarter is heartening.
Looking ahead, LIC Housing Finance, too, has slashed interest rates for loans. That could pare margins, while the dismal economic outlook may inhibit volume growth. Nevertheless, the stock has outperformed the BSE Bankex index on the Bombay Stock Exchange since October and considering the improvement in NPAs, that outperformance should continue.
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