Took corrective steps at all levels post scam: LIC Hsg Fin

LIC Housing Finance has announced its results for the quarter ended December 2010. It has reported a net profit of Rs 213 crore as compared to Rs 154 crore it declared a year ago. Income from operations stood at Rs 1,161 crore.

Speaking on the Q3 numbers, VK Sharma, Director & CEO of LIC Housing Finance told CNBC-TV18 that the company saw high retail growth during the quarter. Sharma expects the company to close the fiscal with margins closer to 3%. On November 24, the company's erstwhile CEO R Ramachandran Nair was arrested in connection with the bribes-for-loans scam. The incident led to brokerage houses cutting their rating on LIC Housing Finance. Sharma, who was appointed CEO after Nair's arrest said, the mood has stabilised across the management level after the company took corrective steps across various levels post the breakout of the scam, and that there was no issue now with the quality of assets that it manages. He added that the CBI has not asked for any further information. Below is a verbatim transcript of the interview. Also watch the accompanying video. Q: Let me ask you first whether the mood and sentiment has stabilized across your cooperation, after all the tumultuous events of the last three months is a leadership team firmly in place, is there any anxiety after all the turbulence that you have passed through or have things stabilized and is it business as usual? A: I can say that mood is upbeat now and things are in place. We have been going through the exercises at all levels so that the confidence of our stakeholders, confidence of our people and customers remain as they had been in the past. We have been fairly successful in that. This has shown in the results because this is primarily the working of each and every member of the team right at the grass-root level and that has resulted in a very high retail growth in this quarter. Q: There was an apprehension that because of the events that happened or came to the fore end of last year maybe your loan officers etc get into a bit of a freeze, operations get affected because of that sentiment prevailing in the institution, have you been able to arrest those kind of apprehensions? A: Yes, we have been fairly successful in that exercise. Q: Do any regulatory issues remain in the sense any more communication that you will require to be doing with CBI officials or in terms of your books being up for scrutiny? A: Till now CBI has not asked us for anything more. But we have provided everything they have asked for. Q: Very strong NII growth this time, the only concern is on whether or not you can achieve that target of 40% credit growth especially in a situation where you may chose to scale down the proportion of developer loans, are you confident of hitting the 40% mark in terms of credit growth for FY12 as well? A: We are not going to scale down the developer loans. Our ratio has been roughly about 11-12% and that we intend to keep at the end of the year also or the total loan portfolio roughly about 11-12% has been the developer loans that we intend to keep in place. We have reviewed the entire portfolio and we are going ahead on a case-to-case basis. Q: The surprise in your number this quarter was that net interest margins went up by more than 20 bps. The market is concerned that NIMs will be under pressure now because of the tight liquidity conditions in the market, do you think in that sense this quarter was an aberration and do you expect margins to come off over the next few quarters? A: At the beginning we had assured that our margins will be between 2.8% and 3%. I will be very happy if it remains around 3%. Q: Do you see any pressures coming from the environment because of the cost of deposits etc, tight liquidity pressuring your spreads going forward or your incremental spreads? A: We are waiting for RBI guidelines. If they increase rates then certainly there will be pressure on that. Q: The loans that were under questioned because of the bribery case, I think amounted to just under Rs 400 crore. Can you give us a sense of where things stand over there, whether any prepayment has been done, how much still remains? A: It is Rs 389 crore to be very precise. Out of that, at present it is Rs 355 crore because the scheduled repayments have come. Some of the builders have approached for prepayment but we are taking a view on it. Q: What kind of provisioning will LIC Housing Finance have to do in that light? A: No provisioning is required to be done. All the loans are performing loans and there is no issue with the quality of assets because the assets also are two times what we have secured. Q: We heard that DB Realty is repaying or has repaid the entire loan to LIC Housing. Any other builders who have also approached you that you can name who are returning your loans in advance? A: As per the contract, whatever is available to them, they are free to do.