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LIC HOUSING FINANCE: Key takeaways
Loan growth to remain strong. The management does not find any signs of slowdown in
its core markets; some pressure in pockets like Mumbai may not be ruled out. As such,
loan traction will continue to remain strong. Post the bribes-for-loan scam, LICHF has
paused approvals for developer loans. The company continues to disburse loans approved
in the past though it has not sanctioned any fresh proposals. The company’s processes
remain robust and that they do not find any cause for concern in the developer-loan
portfolio; they propose to re-commence their developer loan business shortly.
One-time provisions for dual-rate home loans. LICHF has dual rate home loans of Rs160
bn (including 5-year fixed rate loan of Rs50). According to the recent NHB regulation,
housing finance companies need to make a standard asset provision of 2% on ‘teaser
loans’ (dual rate home loans). LICHF is not clear if 5-year fixed rate loans will quality to be
‘teaser loans though the company has made the required provisions in 3QFY11. Notably,
SBI has also not made provisions for its teaser loan book. LICHF will review this shortly.
Margins stable, liquidity raises some concerns. LICHF expects to maintain the current level
of margins (about 2.8-3%. LICHF has passed on the rise by raising lending rates by 50 bps
for existing customers from October 2010 followed by another PLR hike 50 bps from
January 2010. The 5-year fixed rate scheme is now offered at 9.75-10.5% as against
9.25-9.75% offered earlier. Higher yields on the existing loan book and developer loans
are largely supporting about 2% spreads for LICHF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
LIC HOUSING FINANCE: Key takeaways
Loan growth to remain strong. The management does not find any signs of slowdown in
its core markets; some pressure in pockets like Mumbai may not be ruled out. As such,
loan traction will continue to remain strong. Post the bribes-for-loan scam, LICHF has
paused approvals for developer loans. The company continues to disburse loans approved
in the past though it has not sanctioned any fresh proposals. The company’s processes
remain robust and that they do not find any cause for concern in the developer-loan
portfolio; they propose to re-commence their developer loan business shortly.
One-time provisions for dual-rate home loans. LICHF has dual rate home loans of Rs160
bn (including 5-year fixed rate loan of Rs50). According to the recent NHB regulation,
housing finance companies need to make a standard asset provision of 2% on ‘teaser
loans’ (dual rate home loans). LICHF is not clear if 5-year fixed rate loans will quality to be
‘teaser loans though the company has made the required provisions in 3QFY11. Notably,
SBI has also not made provisions for its teaser loan book. LICHF will review this shortly.
Margins stable, liquidity raises some concerns. LICHF expects to maintain the current level
of margins (about 2.8-3%. LICHF has passed on the rise by raising lending rates by 50 bps
for existing customers from October 2010 followed by another PLR hike 50 bps from
January 2010. The 5-year fixed rate scheme is now offered at 9.75-10.5% as against
9.25-9.75% offered earlier. Higher yields on the existing loan book and developer loans
are largely supporting about 2% spreads for LICHF.
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