LIC Housing reported Q1 profit of Rs 4.7 billion , 15.4% y-o-y, 10% below our estimate. AUM growth was inline, but lower than expected NIM and higher provision led to the profit miss. Disbursal growth in individual loans improved, while developer loan disbursal declined on a y-o-y basis. Asset quality deteriorated sequentially led by increase in GNPA in both developer and individual loan segment.
LIC Housing reported profit of Rs 4.7 billion vs. our estimate of Rs 5.2 billion. NII grew 11% y-o-y , 4% miss. AUM grew 15% y-o-y, but NIM fell 11bps y-o-y , -47bps q-o-q. Cost to income at 14.1%, -161bps y-o-y was 77bps below our estimate. Loan loss provision was Rs 1.04 billion, -9% y-o-y, well above our Rs 583 million estimate. Disbursal grew 15% y-o-y led by 17% disbursal growth in individual loans segment (home loan, loan against property). Core home loan book grew at 9.5% y-o-y , 9.1% Q4, while non core home loan growth decelerated to 57% y-o-y, xQ4 FY17 64%. Loan against Property (LAP) book, 12.9% of AUM grew 60% y-o-y, 65% Q4. Developer loan disbursal fell 14% y-o-y, -66% q-o-q, after two quarters of strong growth. Strong growth in riskier developer loans in last two quarters was a concern.
Management had stated that this mainly reflected draw down related to past sanctions. LICHF reported NIM of 2.5%, -11bps y-o-y, -47bps q-o-q, 10 bps below our 2.6% estimate. Yields declined 41bps QoQ to 9.96%, tad below our estimates, individual loan -41bps q-o-q, developer loan -72 bps QoQ) likely reflecting lower home loan rates and partial repricing of higher yielding back book. Income de-recognition due to rise in GNPA in Q1 also impacted Q1 yields. Average borrowing cost (estimated) was broadly stable (+2% QoQ). Spread on incremental loan at 2.18% is higher than the average spread of its existing portfolio (2.08%) . This should support stable NIMs, in our view.