LIC Housing Fin expects no further decline in NIMs in FY13

LIC Housing Finance disappointed with its first quarter performance, reporting a 11% fall in net profit at Rs 228 crore year-on-year due to higher interest cost. The company's net interest income was also dented its net interest income marginally by Rs 11 crore to Rs 350 crore.

In an interview with CNBC-TV18, VK Sharma, Director & Chief Executive of LIC Housing Finance said the company is waiting for the right opportunity to launch QIP. He is also not expecting NIMs to decline further from the current levels. Further, LIC is looking to convert Rs 12,000 crore of fixed loans into floating loans soon, he added. Here is the edited transcript of the interview with CNBC-TV18. Q: With regards to the QIP you are planning of Rs 1200 crore, could you give us more by way of timing and the usage of those funds? A: We had planned the QIP in the last financial year March and we got our AGM approval for it. Now all the things are in place and we are waiting for the right opportunity. Hopefully, in this quarter or the next quarter, we will be able to do it. The processes like identification of merchant bankers etc have started. We have created the board level committee; we have created a company level committee also. Hopefully, at the end of this quarter or at the beginning of the next quarter, we will be through with this. Q: Are you looking for a particular price, else why would you be waiting? A: We are primarily waiting because of market conditions and secondly, we are not in a hurry as such because LIC has come forward and increased its stake. It was started primarily with view of our capital adequacy ratio. But, now we are comfortable with that and it is just a matter of time, because the process takes time. It has nothing to do with pricing. _PAGEBREAK_ Q: Your net interest margins (NIMs) continue to slide lower and now has reached 2.18%, do you expect more southward drift in your NIMs? A: Hopefully no. According to me, the worst is over because now the developer loan has also turned around. We have put our SOP is in place and IT system in place. Though we are very selective about developer loans, we have started doing it and there is a considerable increase in Q1. Hopefully, we will catch up. The primary reason for NIM pressure has been shrinkage in developer's loan portfolio, the cost of borrowing going up and provisioning norms. These are the three primary reasons for the pressure. We have now slowly started adding to the developer’s loan portfolio. This will take care of NIMs to a certain extent. The second aspect is that our Rs 12,000 crore fixed loans are going to be converted into floating rates in the current fiscal. That will also take care of NIMs. Q: With regards to both these issues, your cost of funds which is now 9.6%, do you see it softening in the second half of the year? A: Already in the current quarter, in the month of July we borrowed at a lesser cost. So we find a slight softening there and hopefully, if RBI today takes some steps then it will further come down. Q: On the builder portfolio, there has still been a decline of 4.5% QoQ, but you are saying disbursements are beginning to pick up? A: Yes, we have done more than Rs 450 crore in Q1 and the growth rate is substantial because last year we had done anything. Shrinkage has come primarily because of the repayments. Typically, the builders' loan portfolio is 36 months. So the repayments which we had made two years back are quite substantial. With the growth of a new portfolio, growth of new disbursement, we are comfortable and hopefully, we will be able to catch up. Q: Does the retail loan portfolio continue to look strong? A: Yes, in all other parameters, we are much ahead of the market and comfortable. In that area we are stable. Q: So this quarter when you report margins, will you be able to report slight uptick in margins maybe 2.25% or so? A: Yes, hopefully we will be able to give better results