EUR 120.00 For Business Accounts Only

MOSL: LIC HOUSING FINANCE (Buy)-Sluggish quarter on the business front-PAT in line

LIC Housing Finance: Sluggish quarter on the business front; PAT in line

(LICHF IN, Mkt Cap USD3.2b, CMP INR449, TP INR550, 22% Upside, Buy)

 

• LIC Housing Finance’s (LICHF) 3QFY19 PAT increased 26% YoY to INR5.7b (in-line), driven by stable loan growth and low base of last year.
• Surprisingly, business was impacted due to the liquidity crisis. Individual disbursements (incl. LAP) were up only 2% YoY to INR115b in the quarter, while corporate disbursements increased 27% YoY to INR12b.
• Loan book grew 3% QoQ/ 16% YoY to INR1.81t. Given the lower balance transfers due to the tight liquidity situation, repayment rate (annualized) declined meaningfully from 20% to 16% YoY.
• NII grew 41% YoY as the company recognized a net loss on ‘modification of loans’ amounting to INR149m in 9MFY19 v/s INR1.6b in 9MFY18. Adjusting for this, NII growth was 18%.
• On a calculated basis, spreads remained sequentially stable at 1.3%. We reiterate our thesis that the worst of spreads is behind us and LICHF should be able to maintain/improve spreads, going forward (refer to our ). Given 93% of loans are floating rate and 74% of borrowings are on fixed rate, spreads are likely to remain stable or improve.
• Asset quality was stable with Gross Stage 3 loans unchanged at 1.25%. However, retail lending GNPLs have been inching up (from 47bp in 3QFY18 and 81bp in 2QFY19 to 93bp in 3QFY19). We note a recovery of INR600m in builder loans in 5-6 accounts.