By FMTeam LIC Housing Finance Ltd. (LIC HFL), a leading mortgage financier in India, announced a 23% year-over-year rise in net profit for the third quarter ending December 31, 2024, reaching ₹1,432 crore. This performance surpassed analyst expectations, which had projected a profit of ₹1,285 crore, according to data compiled by LSEG.
Key Financial Highlights:
- Net Profit: Increased by 23% to ₹1,432 crore compared to the same quarter in the previous year.
- Loan Disbursements: Experienced a modest growth of 2%, totaling ₹15,475 crore for the quarter.
- Net Interest Income (NII): Declined by approximately 5%, amounting to ₹2,000 crore.
- Net Interest Margin (NIM): Slightly decreased to 2.70% from 2.71% in the previous quarter and 3% in the corresponding quarter last year.
Asset Quality Improvement:
A significant factor contributing to the improved profitability was the enhancement in asset quality. Stage 3 assets, representing loans overdue by more than 90 days, declined to 2.75% from 4.26% in the same period the previous year. Additionally, the company sold a stressed loan asset worth ₹250 crore during the quarter, further bolstering asset quality.
Comparative Industry Performance:
Despite the positive profit growth, LIC HFL’s loan disbursement growth of 2% was modest compared to some peers. For instance, PNB Housing Finance reported a 30% increase in disbursements for the same quarter, indicating a more aggressive expansion strategy in the competitive housing finance sector.
Analyst Insights:
Industry analysts have noted that while LIC HFL’s asset quality improvements are commendable, the slower pace of loan disbursements may suggest a cautious approach in a highly competitive market. The decline in NII and NIM could be areas of concern, potentially impacting future profitability if not addressed.
Company Outlook:
LIC Housing Finance’s focus on enhancing asset quality has yielded positive results, as evidenced by the reduction in Stage 3 assets. However, to maintain its position in the market, the company may need to strategize on accelerating loan disbursements and improving interest margins. The housing finance sector continues to experience intense competition, particularly in the premium segment, necessitating a balanced approach between growth and risk management.
Conclusion:
LIC Housing Finance’s third-quarter results reflect a strong performance in terms of net profit and asset quality improvement. However, the company faces challenges in loan disbursement growth and interest income margins. Strategic initiatives focusing on competitive positioning and operational efficiency will be crucial as the company navigates the evolving dynamics of the housing finance industry.