Analyst Concall
PNB Housing sees better margins H2 onwards, more loan growth
This story was originally published at 10:24 IST on 5 August 2026
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--PNB Housing: Loan disbursements in July higher than disbursements in Q1
--PNB Housing Fin: See return on assets around 2.3% FY28
--PNB Housing Fin: Better mix to drive improvement in yield
--PNB Housing Fin: See return on assets around 2.35-2.4% FY27
--PNB Housing Fin: Affordable business to help offset higher borrowing costs
--PNB Housing Fin: Credit cost to remain negative FY27
--PNB Housing: Maintain affordable loan book growth guidance of 50-60% FY27
--PNB Housing Fin: May see improvement in cost of funds H2 onwards
--PNB Housing Fin: Maintaining loan book growth guidance of 18-20% for FY27
--PNB Housing Fin: See Q2 to be better than Q1, especially in affordable ops
--PNB Housing Fin: Margins bottomed out, to improve H2 onwards
--PNB Housing Fin: Gross NPA expected to come down in Q2
--CONTEXT: Comments by PNB Housing Fin mgmt in post-earnings analyst call
--PNB Housing Fin: Focusing on increasing productivity of affordable branches
By Priyasmita Dutta and Shruti Nair
NEW DELHI/MUMBAI – PNB Housing Finance Ltd. sees margins to have bottomed out, with an improvement expected from Oct-Mar, its management said Wednesday. "We witnessed an improvement in incremental yield across all businesses vertical, which will support future margin performance," the management said in a post-earnings analyst call. "...gradually there should be improvement in margin; yield has also bottomed out," the management said.
In the quarter ended June, PNB Housing's net interest margin moderated 24 basis points on year and 19 bps on quarter to INR 3.50%. The NIM moderated due to an increase in leverage in Apr-Jun, the company had said in a press release. Its yield improved marginally to 9.48% in Apr-Jun from 9.47% in the trailing quarter. Cost of borrowing for the June quarter also increased slightly to 7.36% from 7.35% in the March quarter.
The management said that with an improvement in the loan book mix, the housing financier can deliver yield improvement on a quarter-on-quarter basis going forward. "If you see Q1 vs Q4 (2025-26 (Apr-Mar)), my overall yield in affordable itself has grown by almost 50 basis points, and in other products also the yield has improved from Q4, which gives us confidence that it will improve," the management said.
Financial results announced Tuesday showed that PNB Housing Finance missed the Street estimates by a whisker, and reported a net profit of INR 5.57 billion in Apr-Jun, up 4.5% on year. At 0922 IST, shares of the company were trading 4.2% higher at INR 1,124.30 on the National Stock Exchange.
The improvement in the loan mix will also help offset higher borrowing costs in the coming quarters, the management said. "...Q2 onwards, with higher contribution of affordable business and emerging business, we feel that we will be able to offset the impacts, if any, of cost of borrowing," they said. "So yields are giving that confidence, and we should be able to offset that." Additionally, a credit rating upgrade can also help improve cost of funds Oct-Mar onwards.
At the end of June, emerging markets and affordable loans made up 41% of the company's loan book, which is expected to inch up to 45% by the end of FY27, showing a shift towards the high-yielding segment. Prime loans made up 59% of the loan book at the end of June, which is seen at 55% at the end of FY27. The company's assets under management totalled INR 930.21 billion at the end of June, with its retail loan assets growing 16% on year to INR 891.78 billion as of Jun. 30, 99.5% of total loan assets.
Disbursements were up 18% on year to INR 58.82 billion during the June quarter. "Overall disbursements up 18% YoY after the one-time impact of change in accounting in disbursement recognition from cheque handover to cheque realisation," the company had said in a press release. Sequentially, disbursements were down 37% due to seasonality. The management said disbursements are likely to be healthy in FY27 with disbursements in July already exceeding the total disbursements in Apr-Jun.
The management also maintained its guidance for loan book growth for FY27 at 18-20%, although there is scope to do better. "I think 18-20%, that's the guidance which we are going to definitely meet. Our team is focusing on better growth than what we have given guidance for. I think we should do much better than what we have given guidance for," the management said.
They also maintained the 50-60% growth guidance for affordable loans. To support this trajectory, the housing finance company will also do micro-housing business from the affordable branches. "We are actively focusing on increasing the productivity of affordable branches, while select prime and emerging market branches also started contributing to affordable business," the management said. They see affordable sector loan disbursements better in the September quarter compared to the last quarter.
PNB Housing Finance is India's third-largest housing finance company by loan assets and is promoted by Punjab National Bank. Its wholly-owned subsidiary, PHFL Home Loans and Services Ltd., acts as its in-house sales and distribution channel. PNB Housing Finance is also a deposit-taking housing finance company. In terms of metrics, the management said that PNB Housing Finance's return on assets should be around 2.35-2.4% in FY27, and around 2.3% in FY28. "We would definitely like to maintain that."
On asset quality, the management said gross non-performing asset ratio is expected to come down in the September quarter. "A minor increase was seen in Q1 because it is cyclical in nature and is expected to come down in Q2," they said. Its gross NPA ratio remained sub-1% during the June quarter at 0.95%, down 11 bps on year but was 2 bps higher sequentially. The net NPA also inched up by 1 bp to 0.58% in Apr-Jun. Going ahead, the credit cost should continue to remain negative, the management said. PNB Housing Finance's credit cost was negative 12 bps in the June quarter. End
Edited by Deepshikha Bhardwaj
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