Increase in expenses, coupled with a dip in other income, weighed down LIC Housing Finance profits in the first quarter.

The company reported a 11 per cent decline in net profit at Rs 228 crore in the April-June quarter against Rs 256.50 crore in the year-ago period.

In the reporting quarter, LICHF’s interest income on housing loans increased by 27 per cent to Rs 1,718 crore (Rs 1,358 crore in the year-ago period).

Total expenses, comprising mainly interest expense and provisions for bad loans, increased by 36 per cent to Rs 1,463 crore (Rs 1,073 crore). Other income dropped by 30 per cent to Rs 21 crore (Rs 30 crore).

Net interest margin, which is the ratio of net interest income to average earning assets, for the reporting quarter was lower at 2.18 per cent (2.78 per cent).

According to Mr V.K. Sharma, Director & Chief Executive, “Business environment has been very challenging….Margins have been under strain owing to the high interest rate regime, high borrowing costs and a lower developer loan portfolio.”

In April-June, developer loan disbursals showed improvement and this is likely to help increase the margins going forward, added Mr Sharma.

Individual loan disbursements increased by 29 per cent at Rs 4,470 crore (Rs 3,468 crore) and developer loan disbursements jumped by 315 per cent at Rs 321 crore (Rs 77 crore).

LICHF, in a statement, attributed the drop in profitability to the decline in the developer loan portfolio and the lower-than-expected developer loan disbursals on account of the overall economic scenario.

Shares of LICHF ended 1.09 per cent higher at Rs 251.05 on the BSE on Tuesday.

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