April 28, 2011 / 20:59 IST
Mortgage lender LIC Housing Finance expects its net interest margin to contract to 2.5-2.7% in the current financial year from 3.08% a year earlier on higher interest rates, a senior official said on Thursday.
"The interest rate is going up. How much more will we load to customers? Some hit we will have to take," VK Sharma, director and chief executive, told Reuters in a telephonic interview.
India's central bank has already raised its key lending rate by a total of 200 basis points since March last year to tame sticky inflation and is widely expected to go for another round of hike on May 3.
The high interest rate scenario has prompted several domestic banks to lower credit growth target for FY12 to 18-22%.
However, the state-run lender expects loan disbursements to grow at 25% in FY12. Individual loan disburesements in FY11 grew 41%.
"Our customer base is individuals, so despite tight situation in the March quarter, we have shown good growth," he said referring to high interest rates in the period.
Sharma said demand for home loans was slow in certain cities including Mumbai. "But (in) Tier II, Tier III cities, the demand is very high. That is one of the focus areas for us."
Profit growth
LIC Housing, part of the country's largest insurer Life Insurance Corp of India, posted a 47% rise in FY11 net profit to 9.74 billion, boosted by one-time gain due to sale of investments. Its net interest income rose 55% to Rs 1,370 crore in FY11.
It expects profit to grow by 25-30% in FY12, Sharma added.
In the quarter-ended March, the lender posted a 47% rise in net profit at Rs 315 crore. Its individual
loan disbursements rose 71% to Rs 6,460 crore.
However, growth in April-June quarter is likely to be slow as the period is traditionally lean, Sharma said, adding the lender was seeing "good demand" from developers.
"First quarter is a lean period so it will be slow. And we have come out of a very, very challenging time. We are setting up the whole system in such a manner that we maintain the growth rate," he said.
LIC Housing's net non-performing assets was almost negligible at 0.03%, or Rs 15 crore, which it expects to maintain, going forward, Sharma added.
The firm did not have any fund raising plans as of now but "if we maintain this growth rate, we may require. We will take a view in the second quarter," he said.
Shares of LIC Housing, valued at USD 2.4 billion, ended down 1.12% at Rs 225.45 in a weak Mumbai market.
