LIC Housing tanks 13% after reporting weak Q2 results

Shares of LIC Housing Finance plunged as much as 13 per cent during the trading session on Wednesday, after the company reported a weak set of numbers in the September quarter, much below the Street expectation.

The second largest pure-play mortgage lender announced a 23 per cent on-year growth in net profit at Rs 305 crore for three months period ending September.

The subsidiary of the country's largest insurer LIC said its net interest income for the quarter declined 80 basis points to Rs 1,163 crore from Rs 1,173 crore, but the management did not give any reason for the same.

Following the announcement of results, shares of LIC Housing plunged 13 per cent to Rs 349.1 on Wednesday, before recovering to Rs 363.5. The scrip had settled at Rs 400.4 in the previous session.

Individual loan disbursements declined marginally to Rs 14,300 crore from Rs 14,330 crore in the reporting quarter, taking total disbursements to Rs 16,786 crore, up 4 per cent from Rs 16,110 crore.

The key profitability metric, net interest margin – the difference between what it earns from lending and what it spends in cost of funds – stood at 1.80 per cent, down from 2 per cent a year ago.

The company said its provisions rose to Rs 6,522 crore on an expected credit loss basis and provision coverage ratio stood at 44 per cent for stage 3 accounts against Rs 5,355 crore in September 2021.

Brokerage firm Yes Securities said LIC Housing reported very weak numbers and the key big negative was a sharp NIM decline versus expectation of improvement. "Another negative was significantly higher credit cost," it said.

With growth on expected lines, the NIM trajectory would be keenly watched, said the brokerage anticipating a more than 10 per cent earnings cut.

Shares of LIC Housing Finance have delivered a flat return so far in 2022, whereas the stock is down by 10 per cent in the last one month.

Gaurav Jani, Research Analyst, Prabhudas Lilladher said NII and NIMs were lower. "There seems to be a one-off in the interest income and total expenses which has led to a decline in NII."

Provisions were a miss and PCR on stage-3 increased, he added. "Combined coverage on stage 1and 2 was maintained at 34bps. PAT missed estimates."

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