State-run LIC Housing Finance is expected to report a 13 percent growth in second quarter net profit at Rs 350 crore compared to Rs 310 crore in same quarter last year, according to the average of estimates of analysts polled by CNBC-TV18. The company will announce its earnings on Saturday.
Net interest income (NII) of the housing finance company may increase 18.6 percent to Rs 537 crore in the quarter ended September 2014 from Rs 453 crore in corresponding quarter of last fiscal.
Earnings need to be closely watched as in Q1FY15 NII growth slowed due to net interest margin decline of 21 basis points Q-o-Q and 26 basis points fall in spreads on account of higher bank borrowing. Profit also slowed, showing a growth of 3.8 percent Y-o-Y due to effective tax rate increasing on deferred tax liability (DTL) creation of Rs 32.2 crore on transfer of profit to special reserve as per NHB directive.
Reason for higher borrowing costs was lack of clarity on debenture redemption reserve under New Companies Act, because of which LIC Housing Finance shied away from bond market in first 2 months of Q1FY15.
Provision coverage ratio also needs to be closely watched as it declined 200 basis points sequentially to 39 percent in Q1FY15.
As far as asset quality is concerned, one thing to watch out for is non-performing liability in developer segment.
The poll expects loan growth of 15-16 percent led by retail book while the management guidance has been 20 percent loan growth in FY15.
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