EUR 120.00 For Business Accounts Only

MOSL: PNB HOUSING FINANCE (Neutral)-Spreads at historical lows; healthy improvement in asset quality in the Corporate book

• PAT grew 39% QoQ to INR2.4b in 1QFY23 (46% beat). NII was flat QoQ, but fell 28% YoY to INR3.8b (inline). Credit costs at INR0.5b was below our estimate of INR1.2b.
• GS3/NS3 declined by ~180bp/90bp QoQ to 6.4%/4.3% (as a percentage of loans), with Stage 3 PCR declining by ~5bp to ~33%. ECL/EAD also fell to 3.5% v/s 4.4% in Mar'22.
• We now expect the ongoing consolidation process to continue for the whole of FY23, post which PNBHOUSI should start exhibiting AUM growth. While corporate asset quality has started to improve, it is important that the company sustains this traction all through the remainder of FY23. Given that it already carries healthy provisions on its Balance Sheet, we build in moderate credit costs of ~0.7% each in FY23/FY24. We raise our FY23/FY24 EPS by 2% each to factor in higher fee income and lower credit costs.
• We expect PNBHOUSI to deliver 5% PAT CAGR over FY22-24 and 8-9% RoE in FY23/FY24, excluding any contingencies arising from slippages in the Corporate book. We maintain our Neutral rating on the stock with a TP of INR390 (based on 0.6x FY24E BVPS).

 

Disbursements still muted; margin stable, but spreads at historical lows

• Disbursements grew 94% YoY to INR34b. Retail disbursements stood at 98% of total disbursements in 1QFY23. PNBHOUSI disbursed INR765m under co-lending. The decline in AUM continued, down 2% QoQ and 10% YoY to ~INR649b.
• CoF increased by ~10bp QoQ, resulting in historically low spreads of 1.9%. Margin was broadly stable at 2.25%.