LICHF’s 4Q FY13 PAT of Rs3.16B (+25% Y/Y) beat estimates (JPMe:
Rs2.4B), primarily due to a sharp NIM improvement (2.45% vs. 2.09% in
Dec-Q) on a lower cost of funds (down 27bp Q/Q). Earnings were also
aided by provision write-back on the back of last Q’s NPA recovery. Book
spread (138bp) has finally started to catch up with incremental lending
spread (160bp), thereby helping margins. The key delta to the spreads
hereon, in our view, will be LICHF’s ability to scale up project loans in
the mix – now at a multi-year low (3.4%). We reduce our FY14/15
earnings estimates by 10-12% as we lower our spread assumptions.
NIM surprised positively on lower cost of funds: LICHF’s 4Q NIM at
2.45% was up 36bp Q/Q and a positive surprise. NIM improvement was
primarily driven by a lower cost of funds, down 27bp Q/Q to 9.4% in
Mar-Q. Yield on individual portfolio increased by a marginal ~7bp Q/Q;
while developer loan yield was muted at 13.1%, down 230bp Y/Y.
Overall the spread on book (138bp) has started to catch up to the
incremental spread (160bp) and provides some headroom for additional
improvement ahead.
Loan growth remains robust: Overall loan growth remained steady at
23% Y/Y, with individual loan growth even higher at 25% Y/Y.
Individual disbursements also held up well at 19% Y/Y, while developer
loan disbursements came off in Mar-Q (down 31% Y/Y/62% Q/Q) after
witnessing a sharp increase in Dec-Q. Overall developer loan share at
3.4% is at its lowest point and should pick up ahead given an
improvement in the approvals pace in key markets of Mumbai / Delhi.
Asset quality showed improvement sequentially: Asset quality saw an
improvement on a sequential basis with GNPA in absolute terms down
12% Q/Q and GNPA ratio at 0.61% down 13bp Q/Q. Fresh slippage in
the developer book for the Q was Rs0.7B but also had recoveries of last
Q’s NPA (net reduction of Rs 0.7B). On a Y/Y basis, the GNPA/NNPA
ratios increased by 19/21bp, respectively, due to some stress in the
developer portfolio, while individual loan portfolio asset quality held up
well. With teaser provisioning releasing through FY14 (teaser portfolio),
the incremental credit cost hit to the P&L should be lower at the margin.
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Rs2.4B), primarily due to a sharp NIM improvement (2.45% vs. 2.09% in
Dec-Q) on a lower cost of funds (down 27bp Q/Q). Earnings were also
aided by provision write-back on the back of last Q’s NPA recovery. Book
spread (138bp) has finally started to catch up with incremental lending
spread (160bp), thereby helping margins. The key delta to the spreads
hereon, in our view, will be LICHF’s ability to scale up project loans in
the mix – now at a multi-year low (3.4%). We reduce our FY14/15
earnings estimates by 10-12% as we lower our spread assumptions.
NIM surprised positively on lower cost of funds: LICHF’s 4Q NIM at
2.45% was up 36bp Q/Q and a positive surprise. NIM improvement was
primarily driven by a lower cost of funds, down 27bp Q/Q to 9.4% in
Mar-Q. Yield on individual portfolio increased by a marginal ~7bp Q/Q;
while developer loan yield was muted at 13.1%, down 230bp Y/Y.
Overall the spread on book (138bp) has started to catch up to the
incremental spread (160bp) and provides some headroom for additional
improvement ahead.
Loan growth remains robust: Overall loan growth remained steady at
23% Y/Y, with individual loan growth even higher at 25% Y/Y.
Individual disbursements also held up well at 19% Y/Y, while developer
loan disbursements came off in Mar-Q (down 31% Y/Y/62% Q/Q) after
witnessing a sharp increase in Dec-Q. Overall developer loan share at
3.4% is at its lowest point and should pick up ahead given an
improvement in the approvals pace in key markets of Mumbai / Delhi.
Asset quality showed improvement sequentially: Asset quality saw an
improvement on a sequential basis with GNPA in absolute terms down
12% Q/Q and GNPA ratio at 0.61% down 13bp Q/Q. Fresh slippage in
the developer book for the Q was Rs0.7B but also had recoveries of last
Q’s NPA (net reduction of Rs 0.7B). On a Y/Y basis, the GNPA/NNPA
ratios increased by 19/21bp, respectively, due to some stress in the
developer portfolio, while individual loan portfolio asset quality held up
well. With teaser provisioning releasing through FY14 (teaser portfolio),
the incremental credit cost hit to the P&L should be lower at the margin.
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