PNB Housing Finance conducted a conference call on 29 April 2024 to discuss its financial results for the quarter ended March 2024. Girish Kousgi, MD&CEO of the company addressed the call:

Highlights:

The company has recorded double digit growth of 14% in the retail loan book which is the highest growth in the last 5 years.

the share of retail loan book stands at  97% of the overall loan book. 

the company started affordable housing finance business in FY2023 which has increased more than 11 times to Rs 1800 crore end March 2024 from Rs 138 crore end March 2023.

the affordable housing finance is conducted in 160 branches, which are located in tire 2 and 3  cities. 

Affordable housing contributes 12% of the disbursements. 

The company has started emerging market business in April 2024 with 50 branches and aims to achieve disbursements of 40-42% from affordable housing and emerging market segment in FY2025 with the focus on high yielding loans. Balance 58% of the disbursements are expected to be contributed by prime segment. 

The focus is on raising the share of high yield loans and out of 300 branches of the company two third branches would focus on the high yield affordable housing and emerging market loans. 

The corporate loan book has declined by 46% from Rs 3800 crore end March 2023 to Rs 2052 crore end March 2024.

The company is targetting loan growth of 17% in the retail loan book for FY2025. 

The company has recorded 25% growth in the disbursements to Rs 5541 crore for Q4 and 19% to Rs 17483 crore for FY2024.

The share of affordable housing finance in the overall disbursements has increased to 12% in Q4 and 10% in FY2024 which is expected to further increase to 18% in FY2025. 

About 86% of the retail loans has a ticket size of below 1 crore. 

The focus is on achieving the best in class asset quality. The company has exhibited 57% decline in the GNPA ratio from 3.83% end March 2023 to 1.5% end March 2024.

The net NPA ratio has also declined below 1% at 0.95% end March 2024.

The corporate gross NPAs has declined from 22.5% end March 2023 to 3.31% end March 2024. The reatil GNPA has also declined from 2.57% to 1.45%.

The company used various legal tools for expediting the recovery. 

The company has auctiond 268 properties in FY 2024 as against 95 properties in FY 2023 and there was no principle loss on these 268 properties auction. 

The company has written off assets pool of Rs 1700 crore in the corporate segment and Rs 500 crore in the retail segment. 

the company has recorded recoveries of Rs 100 crore in written off pool in FY 2024.

The corporate book reduction is aided by resolution, prepayment, sale to ARC etc. 

the company has received NHB financing of Rs 3000 crore during the current year which was not there in the earlier years due to high NPAs. 

The cost of borrowing is 50 bps lower than the other sources of borrowing for the NHB financing. 

The company has raised Rs 1500 crore through NCDs and Rs 10000 crore through CPs. The cost of borrowing stood at 7.93%.

The deposits of the company increased by 3% end March 2024.

The company received rating upgrade from AA   to AA + from 3 credit rating agencies. 

The account of Rs 126 crore from the corporate segment was classified to stage 2 in Q4.  The company is closely monitoring the situation and expect the accounts to get upgraded to stage 1.

The company expect margins to be at 3.5%.

ROA is expectef to be maintained above 2.1%.

The credit cost is expected to be at 30 bps for FY2025 excluding write backs. 

The credit cost the company is targeting good recovery from the retail as well as corporate loan book in FY 2025

The credit cost stood at 4 bps in Q4 and 25 bps in FY2024. 

The recoveries from written off accounts was Rs 49 crore in Q4 and Rs 99 crore in FY204. This has helped to contain credit cost.

Rating upgrade and various initiatives on the diversifying sources of borrowing along with the focus on high yield loans, the company is expecting to maintain margins around 3.5% going forward. Restart of corporate loans would also support margin. 

The balance transfer out stands at 7% for the company

The company expect opex to AUM ratio at 95 to 100 bps. 

The RoE is expected to be muted on account of capital raise. 

The company aims to contain the share of corporate loan book below 10%.

The branches are achieving break even in 8 to 9 months.