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ICICI Securities Report
LIC Housing Finance Ltd.’s erratic net interest margin behaviour across quarters and cycles makes its NIM trajectory a forecasting challenge.
In initial phases of interest rate or asset quality cycles, there have hardly been instances where LIC Housing Finance has not failed to disappoint. Nonetheless, it may be different this time given:
External benchmark lending rate regime has altered the hypothesis that borrowing cost outweighs loan repricing for housing finance companies in a rising rate environment and spreads compress in the immediate- to near-term.
Moreso, Housing Development Finance Corporation Ltd.'s gradual exit from the wholesale borrowing market in transition to its proposed merger with HDFC Bank Ltd. will play to LIC Housing Finance’s benefit (as the next-best AAA rated HFC alternative).
Analysing the facts related to LIC Housing Finance’s lending, borrowing profile and the running math around it, suggests an element of positive surprise in the NIM trajectory this cycle.
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