Developer loans degrade asset quality

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LIC Housing Finance Ltd.Profits in the first quarter fell on the back of increased provisions as developer loans to a lender rose.

Net income fell 87% from a year earlier to Rs 153.4 crore between April and June, according to its stock records. Net interest income of the housing finance company rose 4.5% to Rs 1,275 crore.

The company reported an impairment of Rs 830 crore in the first quarter, up from Rs 56 crore reported a year ago. This is 15% lower than in the previous quarter.

Stage 3 defaulted loans or loans overdue for more than 90 days accounted for 5.93% of the total advances as of June. This is up from 4.12% as of March and 2.83% as of June 2020.

Provisions for credit losses rose to Rs 4,727 crores, up 77% from the same period last year.

“There has been an increase in delinquencies, mainly due to the economic activity affected in the first quarter,” said Y Vishwanath Gode, managing director and chief executive officer, in a statement. “With improved economic performance and our strong and focused recovery efforts, we are confident we can control the same.”

The stress also manifested itself in the company’s restructured loan portfolio. According to the disclosures, LIC Housing Finance has restructured loans of Rs 5,353 crore as of June. Of this amount, Rs 4,704 crores was raised from the builders’ loan portfolios, while the retail borrowers contributed Rs 648.7 crores. The company holds reserves of Rs 500 crores against these restructured loans.

  • The total loan portfolio amounted to Rs 2.32 million, which is 11% more than last year.

  • The individual loan portfolio rose to Rs 2.17 crores from Rs 1.95 crores a year ago.

  • From loans to individuals, the portfolio of housing loans increased by 13%.

  • The company’s developer loan portfolio stood at Rs 15,601 as of June, up from Rs 14,641 a year ago.

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