PNB Housing Finance sheds over 3% even as asset quality improves substantially in Q2

Shares of PNB Housing Finance declined by over 3 per cent to the day’s low of Rs 694.2 apiece on the BSE on Wednesday (October 25) after the home financing entity reported its September quarter results on Monday post-market hours.

For the July–September period, PAT at the company grew 46 per cent year-on-year (YoY), while on a sequential basis, the figure grew 10 per cent to Rs 383 crore. Net interest income, or NII, which is the difference between the interest earned and the interest expended, also improved 2 per cent YoY and 5 per cent sequentially to Rs 661 crore.

The spread on loans for the period under review stood at 2.59 per cent, in comparison to 3.38 per cent in the same quarter last year and 2.62 per cent in the June-ended quarter of FY24.

The asset quality at the company improved considerably as the gross NPA, or non-performing assets, reduced from 3.76 per cent in the quarter ended June 2023 to 1.78 per cent in the recently concluded quarter. PNB Housing has fully recovered a large corporate NPA account, which has slashed its corporate GNPA to just 2.86 per cent from 24.99 per cent as of the June-ended quarter.

Domestic brokerage Motilal Oswal Financial Services has upgraded PNB Housing Finance to 'buy' with a revised target price of Rs 950. The brokerage sees the home financier to be well poised to deliver an improvement in net interest margin (NIM) via product diversification and a potential decline in borrowing costs.

“Asset quality improvement has made it eligible for NHB borrowings, and a potential credit rating upgrade will provide even better access to primary debt markets. A better outlook on loan growth and lower credit costs have led to a nearly 4 per cent / 9 per cent increase in our FY24/FY25 EPS estimates,” the brokerage added.

The equity capital raised by PNB Housing via the rights issue will result in a rating upgrade for the company, the brokerage added.

At around 11 am, the shares of PNB Housing traded with a cut of over 1 per cent at Rs 707.95 apiece on the BSE.

With an m-cap of Rs 18,379 crore, PNB Housing Finance is a small-cap company. The company offers housing loans to corporations and individuals for the purchase, repair, construction, and upgradation of houses. The company also offers loans for residential plots and commercial space.