PNB Housing Finance Q3 Results Review - NIM Expansion, Controlled Opex Aid Decent Performance: Motilal Oswal

Motilal Oswal Report

PNB Housing Finance Ltd. reported a healthy Q3 FY23 with profit after tax growth of 43% YoY to ~Rs 2.7 billion (24% beat). This was driven by ~55 bps QoQ expansion in margin and lower CIR of ~16%. The nine months FY23 PAT rose 15% YoY to ~Rs 7.7 billion.

Net interest income jumped 73% YoY to Rs 7.2 billion aided by slower increase in cost of fund, quicker transmission of interest rates to customers and net positive impact of ~Rs 790 million from the assigned loan pool. Pre-provision operating profit surged 76% YoY to Rs 6.74 billion.

Asset quality improvement was driven by decline in both retail and corporate gross non-performing asset. Total gross/net non-performing asset stood at ~4.9%/3.2% (% of loan assets) and declined 120 bps/50 bps QoQ, respectively.

Under the new leadership, the company has set-up a dedicated affordable housing vertical and we believe that there will now be renewed focus on both the prime and affordable segments.

Excluding any one-offs in spreads/ margins, we believe that PNB Housing Finance has levers to exhibit a net interest margin improvement through product diversification and potential decline in borrowing costs after the successful completion of its rights issue.

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