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MOSL: PNB HOUSING FINANCE (Buy)-Growth robust, but spreads under pressure

PNB HOUSING FINANCE: Growth robust, but spreads under pressure

(PNBHOUSI IN, Mkt Cap USD2.2b, CMP INR926, TP INR1100, 19% Upside, Buy)

 

• PNB Housing Finance’s (PNBHF) 3QFY19 PAT increased 32% YoY to INR3.0b (14% beat). The beat was largely driven by higher-than-expected upfront income on loan assignment and MTM on the treasury book.
• Despite a tough and volatile environment, PNBHF disbursed INR93b worth of loans (+1% YoY). Repayment rate (annualized) continues to decline and hit a multi-quarter low of 21%, largely due to lower balance transfers in our view. As a result, AUM grew a healthy 38% to INR797b.
• PNBHF sold down INR27.1b worth of loans in the quarter, compared to INR31b in the previous quarter. The mix of loans sold down was 50% home loan and 50% retail LAP. The company recorded an upfront income of INR1.5b in 3QFY19 v/s INR617m in 2QFY19.
• The key negative surprise in the quarter came from loan spreads (calculated), which declined 17bp QoQ to a multi-quarter low of 1.77%. This was on account of ~60bp QoQ increase in cost of funds partially offset by ~40bp increase in loan yield.
• Asset quality remains robust with GNPL ratio of 47bp (largely stable). PNBHF added INR110m to its floating provision buffer, taking the outstanding amount to INR1.57b.