• Sat. Dec 2nd, 2023

Housing Finance Bank

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Clean-up of bad loans frees PNB Housing to focus more on growth

PNB-housing-finance-share-price-nse-bse-S0003568″ class=”autobacklink-topic” target=”_blank” data-name=”PNB Housing Finance” >PNB Housing Finance Ltd remains focussed on improving its asset quality metrics. The company had faced non-performing assets (NPA) issues in the past mainly on the corporate loan book side. Efforts to bring down NPA are bearing fruit. In FY23, PNB Housing’s gross non-performing assets (GNPA) fell to 3.8% from 8.1% in FY22. In the next four-five quarters GNPA levels would be comparable with those in the industry at 1.2%, driven largely by resolution and recoveries, managing director & chief executive officer Girish Kousgi told Prabhudas Lilladher analysts.

Last month, PNB Housing completed its rights issue of 2,494 crore to fund growth. With the balance sheet stabilizing, there is focus on growing the retail segment, which includes growing the affordable housing segment at a fast pace. “The company has diversified and is focusing on prime and affordable housing segments which offer higher yields. And it has reduced its concentration risk in terms of ticket size which is capped at 3 crore from 15 crore earlier,” said Gaurav Jani, analyst at Prabhudas Lilladher.

Graphic: Mint

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Graphic: Mint

As things stand, retail loans form 94% of PNB Housing’s total loan assets while corporate loans constitute the rest. With focus on prime (includes mostly salaried customers) and affordable housing segments, the management targets loan growth of 17% in FY24 and disbursement growth of over 22%. In the March quarter, the company entered the affordable housing segment. It targets a mix of 70:30 salaried and self-employed.

In coming quarters, PNB Housing’s cost of funds is expected to trend lower with likely access to National Housing Bank loans in FY24 following improvement in asset quality metrics. This should aid net interest margin (NIM).

The company expects to maintain its NIM at 3.5% for FY24. In FY23, NIM was at 3.7%. On the corporate loan book side, the management intends to keep it at less than 10%.

Amid this, investors are sitting on handsome gains what with PNB Housing’s shares more than doubling in the past one year. Investors have cheered improvement in asset quality metrics and increased focus on retail housing loan portfolio. Further, management change in October too boosted investor sentiment. Loan growth remains crucial ahead. “PNB Housing must now continue to improve on asset quality metrics and deliver on retail loan book growth targets. We also need to monitor its progress on the affordable housing segment and its loan against property book,” said Deepak Jasani, head of retail research, HDFC Securities.

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Updated: 21 Jun 2023, 11:46 PM IST


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