LIC Housing Finance reports 23% surge in Q3 FY25 net profit amid robust loan portfolio growth

LIC Housing Finance Ltd. (BSE: 500253; NSE: LICHSGFIN) has reported a 23% year-on-year increase in net profit for the third quarter of fiscal year 2024-25, reaching ₹1,431.96 crore, up from ₹1,162.88 crore in Q3 FY24. This housing finance growth was driven by a steady rise in loan disbursements, particularly in the project loan segment, and an expanding loan portfolio.

Despite this strong financial performance, net interest income (NII) declined 5% year-on-year to ₹2,000 crore, reflecting ongoing margin pressures. The company’s net interest margin (NIM) fell to 2.70%, compared to 3.00% in Q3 FY24, highlighting the impact of higher funding costs and competitive lending rates in the sector. LIC Housing Finance’s total revenue from operations rose 4% year-on-year to ₹7,057 crore, reinforcing the company’s stable growth trajectory in India‘s housing finance sector.

How has LIC Housing Finance’s loan portfolio expanded?

Loan portfolio expansion remains a key driver of profitability for LIC Housing Finance. The company’s total outstanding loan portfolio grew 6% year-on-year to ₹2,99,144 crore, compared to ₹2,81,206 crore a year ago. The individual home loan portfolio expanded 7% year-on-year to ₹2,54,652 crore, reflecting sustained demand for housing finance. The project loan portfolio rose 2% year-on-year to ₹8,776 crore, supported by an increase in real estate lending activity. Total loan disbursements for Q3 FY25 reached ₹15,475 crore, up 2% year-on-year, indicating steady credit demand in the housing sector.

A notable shift was seen in the project loan segment, where disbursements surged 162% year-on-year to ₹983 crore, compared to ₹375 crore in Q3 FY24. This reflects LIC Housing Finance’s strategic focus on real estate financing, which has contributed to its loan portfolio expansion.

Why did net interest margins decline despite rising revenue?

While LIC Housing Finance recorded higher revenue and loan disbursements, its net interest income declined, leading to a contraction in net interest margin. The NIM fell to 2.70% in Q3 FY25, compared to 3.00% in Q3 FY24 and 2.71% in Q2 FY25. The drop in net interest income suggests higher funding costs, coupled with competitive interest rates in the housing finance sector.

Market analysts suggest that housing finance growth remains intact, but lenders face increasing challenges from fluctuating interest rates and a shift in borrowing patterns. A significant portion of new loans is being issued at lower spreads, impacting overall profitability.

What are LIC Housing Finance’s performance trends for 9M FY25?

For the nine months ended December 31, 2024, LIC Housing Finance demonstrated steady financial growth, despite the decline in NIM. Revenue from operations increased 2% year-on-year to ₹20,767 crore, while net profit after tax rose 11% year-on-year to ₹4,061.06 crore. Total disbursements reached ₹44,866 crore, reflecting a 10% year-on-year growth.

The company’s loan portfolio expansion was led by strong demand in the individual home loan segment, where disbursements totaled ₹36,231 crore, up 4% year-on-year. Meanwhile, project loan disbursements soared 174% year-on-year to ₹2,901 crore, further reinforcing LIC Housing Finance’s commitment to real estate funding.

How is asset quality improving at LIC Housing Finance?

A key highlight of LIC Housing Finance’s Q3 performance was the notable improvement in asset quality. The Stage 3 exposure at default, which indicates non-performing assets (NPAs), improved to 2.75% in Q3 FY25, compared to 4.26% in Q3 FY24. Provisions for expected credit loss (ECL) stood at ₹4,974 crore, with a coverage ratio of 48%, suggesting better risk management strategies.

This improvement underscores LIC Housing Finance’s focus on prudent lending and credit risk mitigation, positioning the company well for sustained profitability.

What is the CEO’s outlook on LIC Housing Finance’s growth?

LIC Housing Finance Managing Director and CEO Tribhuwan Adhikari expressed optimism about the company’s growth trajectory, particularly in the affordable housing segment. Adhikari stated that the company’s housing finance growth strategy is built on a customer-centric approach, with a diversified product portfolio and a commitment to enhancing borrower experience. He emphasized that the affordable housing sector remains a key focus, and LIC Housing Finance anticipates further support from government policy initiatives in the upcoming budget. The final quarter of the fiscal year is crucial for loan portfolio expansion, and the company expects to close FY25 with strong financial results.

Industry experts suggest that India’s housing finance market will continue to expand steadily, fueled by urbanization, rising homeownership trends, and government incentives for affordable housing. The overall macroeconomic environment is expected to remain favorable for home loan growth, as lower inflation and stable interest rates could support continued borrowing demand.

What lies ahead for LIC Housing Finance?

Looking ahead, LIC Housing Finance is expected to focus on balancing growth with profitability, particularly by optimizing its net interest income and loan portfolio mix. Enhancing NIMs will be a priority as the company seeks to manage funding costs while sustaining loan disbursement growth. Strengthening asset quality remains another key focus, with continued efforts to reduce Stage 3 defaults and maintain a healthy credit risk profile.

The company is also expected to expand further into the affordable housing segment, leveraging policy initiatives to grow its housing finance market share. As LIC Housing Finance navigates an evolving financial landscape, its strategic focus on operational efficiency and customer-centric innovations will be crucial in maintaining its leadership position in India’s housing finance sector.

With a strong financial foundation, expanding loan portfolio, and a strategic focus on real estate and home financing, LIC Housing Finance is poised for steady long-term growth. The upcoming budget could play a significant role in shaping the company’s outlook, particularly if new incentives for homebuyers and real estate developers are introduced.