PNBHOUSING Q3 FY26 earnings call.
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PNB Housing Finance delivered a mixed Q3 FY26 with retail loan book growth of 16% YoY reaching ₹81,931 crore, while total loan book stood at ₹82,232 crore. NIM compressed to 3.63% from 3.67% in Q2, impacted by lower disbursement yields and higher runoff pressure. Credit quality improved with Gross NPA at 1.04% (vs 1.19% YoY), and negative credit cost of 19 bps indicates continued recoveries. Yield declined to 9.72% primarily due to corporate account foreclosure (10 bps impact) and BT-out pressures. Management reaffirmed guidance of 17-18% retail loan growth and maintained NIM guidance of 3.6-3.7%. New initiatives include construction finance and emerging developer finance (₹25-30 crore ticket size) targeting 8-10% of total book, with yields of 12-12.5%. ROA guidance of 2.5-2.6% maintained with expectations of normalized credit cost at 20-25 bps from FY27 onward. Affordable segment recalibration in southern markets due to MFI ordinance has stabilized, with growth expected to revert in Q4.
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Guidance to track
- Management reiterated guidance despite Q3 affordable segment slowdown. Expects Q4 disbursement to normalize with 25-30% sequential growth in affordable segment.
- Cost of borrowing improvement offsetting pressure from lower disbursement yields and higher runoff. Post-Q4 recalibration expected once new segments (CF and developer finance) start delivering.
- Management confident of maintaining ROA despite expected normalization of credit cost from negative 19bps to 20-25bps from FY27, driven by new high-yield segments (CF at 12-12.5%, developer finance at 11-14%).
- Currently at 39%, management targets this mix expansion over medium term with continued focus on self-employed customers (45% of portfolio) for better yields.
Risks flagged
- Repayment rate increased from 15-16% to 19% due to balance transfer outs triggered by rate cuts. Management expects this to remain elevated at 18-19% till rates stabilize, impacting portfolio yield.
- Tamil Nadu and southern markets faced challenges due to MFI ordinance affecting collections. Management recalibrated ticket sizes and policies in Q2-Q3; ordinance has now been retracted but competitive intensity may have changed.
- Company entering riskier business segments (construction finance with 12-12.5% yield, developer finance with 11-14% yield) despite maintaining 8-10% exposure cap. Rating upgrade expectations tied to capital position may face scrutiny if asset quality deteriorates.
- Multiple analysts highlighted that maintaining 2.5-2.6% ROA requires ~50bps NIM expansion post credit cost normalization (from -19bps to +20-25bps). Management cited new segment yields as offset but no specific quantification provided for FY28+.
Key quotes
- We don't foresee any increase in any of the segments. We are adequately provisioned across all the stages and that may continue.
- The kind of yield and the NIM we will get in construction finance and my small emerging developer funding... I think we are very pretty much confident that we'll be able to do it because the scale up business will also help us because once the business scales up your cost always goes down.
- Large part of this is on account of BT outs and the increase is actually on account of BT outs... this challenge is not with us I think this is industry challenge which industry is facing whenever there is a sharp rate cut you will see this trend.
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