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Motilal Oswal Report
LIC Housing Finance Ltd.'s Q4 FY23 profit after tax grew 6% YoY at ~Rs 11.8 billion (~48% beat) driven by healthy net interest income growth, decline in the cost-to-income ratio and lower credit costs of ~45 basis points (annualised; previous quarter: ~115 bp and previous year: ~30 bp). Its FY23 profit after tax grew 26% YoY to ~Rs 29 billion.
NII at ~Rs 20 billion (26% beat) rose 22% YoY, while pre-provision operating profit at Rs 17.5 billion (28% beat) grew 16% YoY. Cost-to-income ratio moderated to 13.6% (previous year: 14.2%).
Its Q4 FY23 net interest margin (reported) at ~2.93% expanded ~50 bp QoQ, driven by a ~33 bp improvement in (reported) yields to ~10%. The cost of funds rose ~23 bp QoQ to ~7.6%. FY23 NIM stood at ~2.4% (previous year: ~2.3%).
LIC Housing Finance has taken an additional retail prime lending rate increase of ~25 bp from April 2023 onwards.
LIC Housing Finance has successfully navigated the rising interest rate cycle and has effectively transmitted the higher interest rates to its customers. This along with adept liability management resulted in lower increase in CoF and expansion in NIM during Q4 FY23.
Management shared that with expected stability in interest rates, it hopes for a recovery in mortgage demand and stabilization of NIM at ~2.5% in FY24E.
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