MOSL: LIC HOUSING FINANCE (Neutral)-Retail loan growth sluggish-Spreads at 12-quarter low
LIC HOUSING FINANCE: Retail loan growth sluggish; Spreads at 12-quarter low
(LICHF IN, Mkt Cap USD4.4b, CMP INR557, TP INR608, 9% Upside, Neutral)
- LIC Housing Finance (LICHF) reported a PAT decline of 2% YoY to INR4.9b (5% miss), as margins came in weaker than expected.
- Loan book growth remained in line with past trends at ~15-16% YoY, with core home loans growing at 11% YoY. Loan mix remains largely stable, with core home loans accounting for 83% of the portfolio. Loan book growth in LAP and builder loans continues to be strong at 47% YoY each.
- Calculated spreads declined ~37bp YoY to 1.35% – the lowest spread in the past 12 quarters. This spread was manifested as loans got re-priced faster (-89bp YoY) than borrowings (-52bp YoY). While LICHF will continue to get the re-pricing benefit of maturing borrowings, it will also continue to face yield pressure – hence, we expect spreads to remain under pressure.
- As a result, core NII declined 6% YoY to INR9.0b. We believe NII growth would at best match loan growth in the coming quarters.
- GNPL ratio was up 7bp QoQ and 31bp YoY to 0.87%, driven by higher GNPL in the corporate loan book. GNPL in the corporate loan book increased from INR3.4b in 3QFY17 to INR6.6b now. Consequently, provisions made in the quarter increased substantially from INR4.0b in 3QFY17 to INR6.0b in 3QFY18. PCR stands at 44%.
LIC Housing Finance provides loans for purchase, construction, repairs and renovation of houses and flats to individuals, corporate bodies, builders and co-operative housing societies. Co.'s subsidiary is engaged in the business of setting up, running and maintaining assisted living community centre and care homes for senior citizens.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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