LIC Housing – competitive pressure eases; can boost value by 6-7%:; EMkay

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LIC Housing – competitive pressure eases; can boost value by 6-7%

SBI withdraws teaser rates – reduces competitive pressure

SBI has decided to withdraw its teaser rate loans with effect from May 1, 2011. We will be the move would be more positive for LIC Housing Finance as it definitely takes away the competitive pressure on pricing. Earlier while the difference between the rates offered by LIC Housing Finance and SBI for loans upto Rs3mn was 75bps, the same now stands reduced to <30bps now.

Could boost value by 6-7% if LICHF also removes teaser rate

With lower difference between rates offered by SBI and LIC Housing Finance, the legroom for LICHF to discontinue its teaser rate loans has also improved significantly. We have built in provisions of Rs3-3.5bn each for FY12E-FY13E each. If the scheme is discontinued then the savings on provisions will add ~6-7% to LICHF’s ABV over FY12-13E.