Barclays 'Overweight' on LIC Housing Finance

Barclays has retained its ‘Overweight’ rating on LIC Housing Finance and set target price of Rs 321. LICHF management expects slow improvement in spreads in 2H FY13E, driven by growth in the developer book and re-pricing of Rs 52 billion in teaser rate loans.

And, unlike in 1H FY13, re-pricing of maturing bond liabilities in 2H FY13 (Rs 37 bn) is guided to have only a limited negative impact on spreads. Growth and asset quality continue to remain robust. Management expects the developer loan share (which shrank to 4% of loans in 1H FY13) to improve steadily in the next four to six quarters.

Developer loan disbursements are guided to be stronger this quarter (Rs 4-5 bn in 3Q FY13E only; total Rs 4.4 bn in the first two quarters of FY13). However, since repayments will also likely remain high, developer book growth should be slow.