PNB Housing Finance wants to keep its NIM at 3.95% while lowering fund costs

26 Oct 2023 , 11:19 AM

The goal of PNB Housing Finance, a mortgage lender supported by General Atlantic Singapore, is to contain the rising cost of capital while maintaining net interest margin at or slightly below 4%. 

Following the increase in asset quality, the lender can now access refinancing from the National Housing Bank at a lower-than-market rate; additionally, an anticipated rating upgrade will enable it to borrow money at a cheaper cost from the market.

‘We will be able to obtain NHB financing at a significantly reduced cost. We also anticipate a rating improvement due to the performance of the last three quarters. Thus, the cost ought to decrease from its current level as a result of these variables, managing director Girish Kousgi told ET.

For the quarter that ended on September 30, its average cost of borrowing increased to 7.99% from 7.32% during the same time the previous year, while the yield on loans slightly decreased to 10.59% from 10.70%.

According to a report from Motilal Oswal, PNB Housing Finance raised Rs 2500 crore in equity through a rights offering in the first quarter, restoring stakeholder confidence and possibly leading to an upgrade in the company’s credit rating by rating agencies.

For the September quarter, the lender’s NIM dropped to 3.95%, which was 19 basis points less than it was during the same time last year. The interest rate spread, or the difference between the yield on advances and the cost of borrowing, decreased by 79 basis points to 2.59%.

The lender, which only began operating in the affordable housing sector eight months ago, is aiming for a 17–18% increase in its gross portfolio.

At the end of September, the overall loan portfolio was Rs 60,850 crore, with an affordable loan portfolio of Rs 750 crore. The corporate credit portfolio was Rs 2,381 crore, down 58% from the previous year.

It intends to extend corporate credit. It was able to lower the corporate loan gross non-performing assets (NPA) to 2.86% from 25% a year earlier thanks to the recovery of Rs 784 crore from Joyous Housing Ltd. At the end of September, the lender’s overall gross non-performing assets (NPA) decreased to 1.74% from 3.39% in the previous year.

‘There is no specific timeline (for renewing corporate loan disbursement), but I think shortly we’ll start,’ Kousgi stated. ‘Now the focus really is on retail, especially on the affordable segment,’ he stated.

The lender receives an 11.5% profit from the affordable housing loan segment, while the prime segment—which is the company’s mainstay—offers a 10.5% margin.

The promoter of the mortgage lender, Punjab National Bank, owns 28.14% of the business, while foreign portfolio investors, such as General Atlantic, own 24.81%. As of September, General Atlantic alone owned 9.83%.

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