Mortgage lender LIC Housing Finance (LICHFL) today reported an 11.20 per cent dip in net profit in the first quarter ended June 30 at Rs 227.75 crore,primarily because of changes in the provisioning norms coupled with muted advances to realty developers.
The city-headquartered company,a subsidiary of state-
run life insurance giant LIC,had posted a post-tax income of Rs 256.50 crore a year ago.
The macro environment is very challenging and the company,which was mired in bribes-for-loans scam two years back,is very cautious when it comes to lending to developers,LICHFL Director and Chief Executive V K Sharma told reporters.
Against a target of taking the composition of the high-yielding loans to developers at 8 per cent,the mix stood at only 4 per cent as of June 30,2012,he added.
As a result of this and the cost of funds remaining flat at 9.9 per cent,he said,the net interest margin slipped to 2.18 per cent against 2.44 per cent in the year-ago period.
The company had gone slow on lending to developers
following the scandal,in which its then Chief Executive
Ramachandran Nair was arrested by the CBI,and lending to corporates fell from the peak of over 10 per cent.
Sharma,while stressing that the company has performed
well on all other parameters,said LIC Housing is committed to raise the composition to 8 per cent by fiscal end,which will help improve margin in the traditional 2.5-2.7 per cent range.
According to a senior company executive,every percentage point increase in the share of developer loans helps the net interest margin rise by up to 0.07 per cent.
Sharma said the re-pricing of fixed rate loans of up to Rs 12,000 crore into floating rate is expected to happen
till June 2013 and this will also help drive up the margins.
LIC Housing’s core interest income was up 27 per cent
year-on-year at Rs 1,718 crore during the quarter on the back of 29 per cent growth in disbursements.
The other factors affecting the company were the higher provisions following a change in guidelines by the
regulator National Housing Bank,which has asked all housing financiers to provide 0.40 per cent for standard assets.
Sharma said 50 per cent of the total provisioning of
Rs 43.55 crore (against a write back of Rs 2.39 crore in the
year-ago period) was as a result of the new provisioning
He said the company will be going in for a qualified
institutional placement (QIP) of up to 46 million shares and
raise Rs 1,200 crore in the next two or three months.
The infusion,for which the company is in process of
appointing merchant bankers,will help in raising the core
capital to up to 14 per cent from the present 11 per cent,
LICHF is targeting to open 13 new offices in the current fiscal and hopes to have a presence in Singapore to get business from the diaspora,Sharma said.
The company scrip today gained 1.09 per cent to close
at Rs 251.05 apiece on the BSE,whose 30-share Sensex rose 0.24 per cent.