Company Update : LIC Housing Finance Ltd By Motilal Oswal Financial Services Ltd
Earnings beat driven by NIM expansion and lower credit costs
* Disbursement and loan growth marginally better than estimates
* LICHF’s 4QFY25 PAT grew ~25% YoY to ~INR13.7b (~7% beat). FY25 PAT grew ~14% YoY to INR54.3b.
* NII declined ~3% YoY to ~INR21.7b (~6% beat) in 4QFY25. This was led by NIM expansion of ~15bp QoQ, which in turn was aided by a better surplus liquidity management and a ~10bp PLR hike taken by the company in 4QFY25. Fee and other income grew 240% YoY to INR1.6b.
* Opex was elevated and grew ~18% YoY to INR4.5b (~15% higher than MOFSLe) and the cost-income ratio rose ~250bp QoQ to ~19.4% (PY: ~16.7% and PQ: ~16.9%).
* Reported yields in FY25 stood at 9.8% (9MFY25: 9.73%), while CoB declined to ~7.73% (9MFY25: 7.78%). This resulted in spreads improving to ~2.05% (9MFY25: 1.95%). Reported NIM rose ~15bp QoQ to ~2.85%.
* Credit costs stood at ~INR1.1b (~36% lower than MOFSLe), translating into annualized credit costs of 14bp (PY: ~60bp and PQ: -6bp).
* The Board recommended a dividend of INR10/share.
Loan book rises ~7% YoY; disbursements slightly better than estimates
* Loan disbursements in individual home loans (IHL) grew ~8% YoY, while non-housing individual/commercial disbursements rose 19% YoY. Builder/ project loan disbursements declined ~42% YoY.
* Total disbursements rose ~5% YoY and ~24% QoQ to ~INR192b.
* Overall loan book grew ~7.3% YoY and ~3% QoQ to INR3.08t. Home loans grew ~7% YoY, while the developer loan book declined ~13% YoY.
Asset quality improves further; GNPA declines ~30bp QoQ
* GS3/NS3 improved ~30bp/25bp QoQ to ~2.45%/1.2%. Stage 3 PCR rose ~4pp QoQ to ~51.3% (PQ: ~47.5%). Stage 1 PCR was largely stable at ~20bp (PQ: ~18bp), and Stage 2 PCR declined 70bp QoQ to 4% (PQ: 4.7%).
* Stage 2 + 3 assets (30+ dpd) declined ~85bp QoQ to 5.9% (vs. ~6.75% in 3QFY25). ECL/EAD declined ~7bp QoQ to ~1.6% (vs. 1.66% in 3QFY25).
Valuation and view
* LICHF delivered an operationally healthy quarter wherein there was an earnings beat driven by healthy NIM expansion and lower credit costs. Loan growth and disbursements during the quarter were marginally better than estimates. Additionally, asset quality continues to improve, resulting in benign credit costs.
* It will be interesting to understand the management’s outlook on demand for mortgages and its guidance on loan growth. Guidance on NIM (in the current declining interest rate environment) and credit costs for FY26 will also be important. We will review our estimates after the earnings call on 15th May’25.
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