See net interest margins around 2.7% in FY12: LIC Housing

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See net interest margins around 2.7% in FY12: LIC Housing

In an interview to CNBC-TV18, VK Sharma, director and chief executive officer of LIC Housing Finance says, in the next six months, the company’s target is to disburse Rs 2,000-3,000 crore. He expects net interest margins to be around 2.7% at the end of the year.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about LIC Housing Fin See previous management interviews See what other Experts & Brokerages are saying about LIC Housing Fin LIC Housing Fin BSE | NSE 29/05/12 Are Mutual Funds betting on LIC Housing Fin?

In an interview to CNBC-TV18, VK Sharma, director and chief executive officer of LIC Housing Finance says, in the next six months, the company's target is to disburse Rs 2,000-3,000 crore.

He expects net interest margins to be around 2.7% at the end of the year.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Gautam broker. Also watch the accompanying video.

Q: We are into the third quarter, just a month left. How are your disbursements looking?

A: Up to the second quarter our disbursement has been around 24%. Third quarter also disbursement growth is there and I expect that it will remain in 20-25% bracket.

Q: Project loans had seen a substantial slowdown in the past few quarters. How is Q3 looking for you? Any targets you have for the fiscal?

A: We had started giving project loans now. Last quarter, we had given roughly about Rs 400 crore. In the next six months, our target is to disburse Rs 2,000-3,000 crore. Hopefully, further it will be speeded up.

Q: How do you see net interest margins (NIMs) panning out? We had seen some compression in Q2. What's your expectation of where you can end in terms of NIMs for the full fiscal FY12?

A: This compression is visible primarily because our borrowing cost gets affected immediately with the hike of interest rate by RBI. But we pass on this only on a quarterly basis to consumers. We have passed it on on October 1. So, 40 basis points we have passed onto the consumer. That will certainly be visible in the next quarter. With that there will be slight increase in the margin. Also, the margin will also increase with the increasing project loans. We expect that it will be around 2.7% at the end of the year.

Q: How have cost of funds actually panned out? Has there been any kind of moderation in that and how is it impacting margins?

A: We are slowly seeing the deceleration. It has peaked in September. Thereafter again it has started slowly coming down. Now, we are getting the funds at slightly lower rate. Like last NCD we had raised at 9.96%. So, borrowing costs also will slightly come down on incremental basis.

Q: Have you begun to see any pressure on loan defaults, especially from the project side?

A: No. In our project loan, all assets are standard and there is no issue there. I can say that we are one of the best in the NPA management. In last quarter also our NPA has come down by 20%. I hope that in next quarter also it will further come down.

Q: Inspite of that, your provisioning saw a big jump in the second quarter and that was obviously because the new provisioning requirements by NHB. Can you take us through what provisioning we can expect in the second half?

A: No, it will only be incremental now. Whatever business we do, for that we will be making the provisions as per norms. So, there will not be extra provisions required in this.

On the contrary, we may reverse some of the provisioning because our provisioning norms were more conservative than the NHB norms.