By Shashank Didmishe
Mortgage financier LIC Housing Finance will stick to its current practice of resetting interest rates on a quarterly basis even as market leader Housing Development Finance Corporation (HDFC) is shifting to reset its interest to borrowers on a monthly basis, Y Viswanatha Gowd, managing director and chief executive officer, said in an interaction after its financial results for Q1FY23. While LIC Housing Finance will continue with the practice of resetting interest rates on a quarterly basis for all borrowers, the management can take a call on it going ahead, Gowd said.
HDFC is moving individual loans to monthly resets from quarterly for faster transmission of rates, while non-individual loans are already on monthly resets, its management had said in an analyst call earlier.
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The company has passed on the repo rate hikes to its customers but raising the retail prime lending rates by 60 bps so far, which now stands at 7.50%. Going ahead, the company will take a call after the Reserve Bank of India’s decision on repo rates. The RBI’s monetary policy committee (MPC) on August 5 will announce its decision on interest rates.
The company on Thursday reported a 503% year-on-year (y-o-y) increase in its net profit to Rs925 crore in the first quarter of the current financial year. The company posted 9% y-o-y increase in its revenue from operations to Rs5,285 crore in the three months ended June 30.
Net interest income (NII) rose by 26% y-o-y to Rs1,610 crore led by higher loan growth. Net interest margin (NIM) for the quarter was 2.54% as of June 30 as against 2.20% in the previous year.
LIC Housing Finance is expecting its NIM to slightly improve over the current financial year. The company has shown a 34 bps improvement in the NIM on y-o-y basis and 25 bps, sequentially, to 2.54% as of June 30, but overall the company plans to maintain the margin at the current levels. The company has managed to restrict its cost of borrowing to 6.70% in Q1FY23 as compared to 6.88% in the previous year. The company’s almost half of the borrowings are in fixed interest rate which gives the management some comfort against interest rate hikes, he said.
The company’s individual home loan portfolio increased 15% y-o-y to Rs2.1 trillion while the project loan portfolio stood at Rs12,443 crore as on June 30, lower by 20% y-o-y in Q1FY23. Total outstanding loan portfolio grew 10% to Rs2.6 trillion in Q1FY23.
“With the easing of pandemic and better economic activity, there was an overall improvement in our segment. The hybrid work model has been widely accepted across the country, resulting in higher demand for better, larger residential units. This market trend assisted us with higher disbursements and improved financial performance during the current quarter,” Gowd said.
On the asset quality front, the company’s stage-III exposure at default stood at 4.96% as of June 30 as against 5.93% in the previous year. The improvement in asset quality comes due to higher recovery and collection efficiency, which has increased to over 99% in Q1FY23, Gowd said. The company made expected credit loss (ECL) provisions of Rs 6,141 crore as on June 30 as against Rs4,727 crore in the previous year.