L&T Finance's Retail Pivot Boosts NIMs, Fees by 19 BPS; Credit Costs Ease

• L&T Finance's shift to a predominantly retail loan book (98%) has led to significant financial gains, with NIMs plus fees rising 19 basis points to 10.41% in the latest quarter.
• The company's credit costs have declined to 2.83% from 2.98% sequentially, with a projection to moderate further to 2-2.2% by Q4FY27, indicating improving asset quality.
• Growth resumed in mid-2023, primarily driven by higher-yielding retail segments like microfinance, gold loans, two-wheelers, and personal loans, which contribute to better margins.
• Despite potential RBI rate cuts, L&T Finance expects NIMs plus fees to remain in the 10-10.5% range, benefiting from rate-insensitive products and strategic borrowing cost optimization.
• Key segments like two-wheelers, tractors, and rural business finance saw strong disbursement growth in Q3, supported by festive demand and rural recovery.

Why It Matters: L&T Finance's strategic retail pivot has successfully driven up margins and reduced credit costs, ensuring stable financial performance.