LIC Housing Finance, a subsidiary of the Life Insurance Corporation of India (LIC), today reported 58% dip in its net profit at Rs 98 crore for the quarter ended September 2011 on the back of higher provisions for NPAs as mandated by the sector regulator, the National Housing Bank.
Net profit of the housing finance company stood at Rs 234 crore during the same period last fiscal. "The quarter has been a challenging one in terms of overall business environment, especially in view of successive rate hikes in the system. However, despite adversities, the company has been able to post healthy growth and also has been successful in delivering an improvement in asset quality," Director and Chief Executive of LIC Housing Finance, V K Sharma told reporters in Mumbai.
Total income of the company increased by 37% to Rs 1,515 crore during this period. LIC Housing Finance made a regular provision of Rs 519 crore for the non-performing assets (NPA) besides an additional provision of Rs 205 crore during the September quarter as required under new norms set by the National Housing Bank (NHB), Sharma said.
The sector regulator for housing finance companies, recently raised the bar for provisioning requirements in case of doubtful assets to 100% from previous 50%. The NHB also asked the housing finance companies to set aside 0.4% of the total outstanding 'standard' loan as a "buffer". During the second quarter, the company disbursed loans worth Rs 4,736 crore in the individual loan segment, up by 24% over the same period last year.
Loan disbursements by the LIC Housing Finance, to developers for the quarter stood at Rs 412 crore in comparison with Rs 1283 crore in the year-ago period.
"We plan to increase our disbursements to projects in the second half of this fiscal," Sharma said. Total outstanding loan portfolio of the housing finance company stood at Rs 56,098 crore, up by 29 per cent over the same period last year. "While the industry is expected to grow by 15-20 per cent, LIC HF will grow by 20-25 per cent in the current fiscal," he said.
However, net interest margin of the company for the second quarter stood at 2.45% against 2.93% for the same period last year due to rise in interest rates. "We have given a guidance of maintaining a NIM of 2.7% for the whole financial year.
As we are hopeful of higher loan disbursements in the third and fourth quarter, this number will be achieved by end of this fiscal," Sharma said, adding the cost of borrowing has increased by 1.14% year-on-year basis. Gross NPA of the company stood at 0.64 per cent of the total exposure in the second quarter as against 0.74%, while net NPA was at 0.12% as against 0.24% for the same period last year.