Company Update : LIC Housing Finance by Motilal Oswal Financial Services Ltd
Earnings in line; NIM contracts QoQ, and loan growth still sluggish
Weak disbursements with elevated BT-OUT; minor improvement in asset quality
* LICHF’s 2QFY26 PAT grew ~2% YoY to ~INR13.5b (inline). NII grew ~3% YoY to ~INR20.4b (inline). Fees and other income grew 74% YoY to INR1.4b. PPoP grew ~8% YoY to ~INR18.7b (inline).
* Opex dipped ~3% YoY to INR3b (~12% lower than est.), and the cost-toincome ratio declined ~120bp YoY to ~13.9% (PY: ~15.1% and PQ: ~13.4%).
* Reported yields declined ~20bp QoQ and stood at 9.4%, while CoB declined ~8bp QoQ to ~7.4%. This resulted in spreads declining ~12bp QoQ to ~1.98%. NIM in 2QFY26 declined ~6bp QoQ to ~2.62%.
* Credit costs dipped QoQ to ~INR1.7b (~25% higher than est.); the costs translated into annualized credit costs of 22bp (PY: 11bp and PQ: 25bp).
Weak disbursements & higher repayments lead to muted loan growth
* Loan disbursements in individual home loans (IHL) grew ~3% YoY, while non-housing individual disbursements rose 23% YoY. The non-housing commercial disbursements declined ~19% YoY. The builder/project loan disbursements declined ~73% YoY.
* Loan growth was sluggish due to both weak disbursements and higher repayments. Total disbursements de-grew ~1% YoY to ~INR163b. Repayments stood at 18.2% (PQ and PY both at 14.6%). Overall loan book grew ~6% YoY and ~1% QoQ to INR3.12t. Home loans grew ~7% YoY, while the non-housing individual book grew ~17% YoY.
Marginal improvement in asset quality
* GS3/NS3 declined ~10bp each QoQ to ~2.5%/1.2%. Stage 3 PCR improved ~230bp QoQ to ~53% (PQ: ~51%), and Stage 2 PCR rose ~15bp QoQ to ~3.9% (PQ: 3.7%)
* Stage 2 + 3 assets (30+ dpd) declined ~30bp QoQ to 5.9% (vs. ~6.2% in Jun’25). The ECL/EAD remained stable QoQ at ~1.63%.
Valuation and view
* LICHF delivered an operationally soft quarter, with continued sluggish loan growth and disbursements. Asset quality showed marginal improvement, as seen in the sequential improvement in GS3, decline in the 30+dpd, and stable ECL/ EAD. Margins remain under pressure, primarily from lower yields following recent PLR reductions.
* It will be interesting to understand the management’s outlook on demand for mortgages, the competitive intensity from banks, and its guidance on loan growth. Guidance on NIM (in the current declining interest rate environment) and credit costs for 2HFY26/FY27 will also be important. We will review our estimates after the earnings call on 30th Oct’25.
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