PNBHOUSING Q1 FY27 earnings call.
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PNB Housing Finance delivered a mixed Q1 FY27 performance with PAT growing 4% YoY to Rs 557 crore, supported by strong disbursement momentum (18% YoY net, 56% on check-handover basis). The transition to check-realization basis for disbursement recognition created a one-time impact, with management indicating normalization from Q2 onward. Asset quality remained robust with GNPA at sub-1% (0.95%), and credit cost stayed negative at -12bps driven by Rs 67 crore recoveries. However, NIM compressed 19bps QoQ to 3.50% due to leverage increase and Q4 calculation anomaly, though management reiterated margins have bottomed and expect improvement from H2. The affordable and emerging market segment grew 27% YoY, contributing 41% of the retail portfolio with guidance to reach 45% by FY27-end. Capital adequacy remains strong at 28.26%. Key risks include normalization of credit costs from negative to positive territory in FY28, rising incremental cost of borrowing (up 18bps), and execution challenges in accelerating affordable segment growth to guided 60% levels amid intense competition in prime segment.
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Guidance to track
- Management maintained full-year guidance of 18-20% overall loan book growth, noting Q1 was impacted by recognition change and expects catch-up from Q2 onward with July already showing strong momentum.
- Affordable and emerging market segment targeted to grow at 50-60%, contributing 45% of total retail portfolio by FY27-end versus current 41%, and 50% by FY28.
- Management stated margins have bottomed out with yields improving sequentially from Q1; expects gradual NIM expansion in H2 FY27 driven by favorable mix shift toward higher-yielding affordable/emerging segments.
- FY27 ROA expected in 2.35-2.4% range supported by continued negative credit cost; FY28 ROA to normalize to ~2.3% as credit costs turn positive.
Risks flagged
- Affordable disbursements at Rs 555 crore remain below target levels. Prime/emerging segments are growing faster (66%/48%) than affordable (11% on check-handover basis), making it challenging to achieve the 60% growth target in affordable without execution slippage.
- Incremental cost of borrowing increased 18bps in Q1 due to tight liquidity conditions. While yields are improving, further rate increases could offset benefits from mix change and rating upgrades.
- A legacy fraud account (fully provided in FY23) was re-classified during Q1. Management declined to quantify expected recoveries for FY27, stating timing depends on buyer-seller negotiations for the underlying project.
- Negative credit cost (-12bps) driven by TRO pool recoveries of Rs 67 crore is not sustainable. Management guided credit costs will turn positive from FY28, which will compress ROA from 2.4% to ~2.3%, though analysts questioned whether recovery quantum is already normalizing.
Key quotes
- We expect that margin has bottomed out and from second half onward gradually there should be improvement in margin. Yield is also bottomed out and it would improve by change in mix.
- Whatever impact we have witnessed is a combination of prime, emerging and retail because in retail business we have migrated from check handover to debit from our account.
- We are expecting very soon from KRa and Crisil and [rating upgrade] is underway. So all this if affordable momentum picks up this year, next year and the rating upgrades come through, there is upside risk to our ROA for next year.
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