LIC Housing Finance Ltd is expected to report a steady June quarter, with modest growth in both net interest income (NII) and profit after tax (PAT), according to Zee Business Research.
While healthy loan disbursements and demand from the affordable housing segment are likely to support earnings, pressure on net interest margins is expected to persist, making management’s commentary on profitability and margin outlook a key monitorable.
According to Zee Business Research, the housing finance company is likely to report a 5 per cent year-on-year increase in NII and a 7 per cent rise in net profit.
Earnings expected to remain steady
Zee Business Research estimates net interest income (NII) at Rs 2,168 crore, compared with Rs 2,066 crore in the corresponding quarter last year, translating into a growth of around 5 per cent.
Profit after tax (PAT) is expected at Rs 1,454 crore, compared with Rs 1,360 crore reported in the year-ago period, reflecting a 7 per cent year-on-year increase.
The expected growth indicates that business activity remained stable during the quarter, although profitability is likely to be influenced by pressure on lending spreads.
Loan growth likely to stay on track
The company’s loan book is expected to grow around 4 per cent year-on-year, supported by steady demand across housing finance.
Loan disbursements are also expected to remain healthy during the quarter. Growth in the affordable housing segment is likely to provide additional support to the overall loan portfolio, a trend that has remained important for housing finance companies over the past few quarters.
The Street will also monitor whether the company is able to maintain the pace of loan growth while preserving asset quality amid a competitive lending environment.
Margins to remain under pressure
While earnings are expected to improve on a year-on-year basis, margins are likely to remain under pressure.
According to Zee Business Research, net interest margin (NIM) could decline by around 10 basis points sequentially during the June quarter. The moderation is expected to reflect pressure on spreads, a trend that has been visible across several large housing finance companies.
Management’s commentary on the margin outlook, funding costs and lending yields will therefore be closely tracked, as these factors are expected to influence earnings over the coming quarters.
Credit cost may inch up
The research team expects credit cost to increase by around 0.17 per cent during the quarter.
While the increase is not expected to materially affect earnings, investors will closely monitor management’s comments on asset quality, recoveries and provisioning trends.
Any guidance on credit costs for the remainder of the financial year will also remain in focus.
Project finance business in focus
Apart from the retail housing portfolio, the company’s project finance business is expected to post a better performance during the June quarter.
A stronger showing from this segment could provide support to the overall earnings profile and partially offset pressure arising from lower margins.
What the Street will watch
Beyond the headline numbers, investors are expected to focus on management commentary around net interest margins, funding costs, loan growth, disbursement trends and asset quality.
Updates on demand in the affordable housing segment, the outlook for project finance and any indication of how margins could move over the rest of the year are also likely to be closely watched.
While Zee Business Research expects LIC Housing Finance to deliver another quarter of steady earnings growth, the management’s outlook on margins is likely to be the key factor shaping the market’s reaction to the results.