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Home / Markets / Stock Markets /  Jefferies sees this Indian financial stock to benefit amid rising interest rates, has 'Buy' tag
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Housing loan demand stays strong and home loan rate hike of 125/110 bps YTD FY23 could lift spreads for LIC Housing Finance despite rising interest rates given favorable floating asset/ fixed liability profile, as per global brokerage house Jefferies. 

“Asset quality issues have likely peaked & share of wholesale (higher stress) loans is falling. We expect slippages from restructured book, but this seems largely priced in. Lower credit costs should further aid earnings growth. At 0.9x FY23e BV, valuations seem attractive," the note stated. Jefferies has maintained its Buy rating on LIC Housing Finance shares with a target price of 510 ( 450) on it sees the company better placed amid rising interest rates.

LIC Housing Finance has raised rates for new and existing home loans by 125 /110bps (including 50 bps hike in Aug) in FY23 YTD. With 96% floating rate loans and 51% fixed rate liabilities, portfolio spreads (back book) could rise to c.2% from 1.87% as on March. This could lift overall spreads, despite tad lower spreads on new loans and a 10 bps increase in spread could lift EPS by 6%, as per the brokerage house.

Strong momentum in housing should support 15% loan CAGR in housing loans in next 3 years. Overall loan growth may be tad lower at 13% CAGR over FY22-25e due to moderate growth in LAP book and marginal decline in developer book, it highlighted.

“LIC Housing should benefit from strong momentum in housing demand. With 50%+ fixed liabilities and 96% floating rate loans, LICHF should manage spreads better than most HFC peers. Asset quality concerns are receding and most stress in the non housing book has been recognized," said Jefferies and expects stage 3 assets to stabilize and credit costs should drop over FY22-25e driving healthy EPS CAGR and c.14% ROE over FY22-25e.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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