PNB Housing Finance Ltd. share price target

PNB Housing Finance’s (PNBHF) Q2FY23 earnings beat was primarily led by higher
assignment income and better incremental spreads, partially offset by higher than
expected credit cost and opex.

NII fell 19% YoY and 11% QoQ to INR4.15b (20% below expectation). Provisions at INR1.3b were below our estimate of INR2.4b. Disbursements declined ~5% QoQ to INR28.3b. Accordingly, AUM decreased 5% QoQ and 14% YoY to ~INR665b. GNPA and NNPA rose ~170bp and 155bp QoQ to 7.6% and 4.9% (as a percentage of loans), respectively, with Stage 3 PCR declining 760bp to 36%. ECL/EAD also declined ~40bp sequentially to 4.4%. A corporate exposure of ~INR4b (already identified as SICR) slipped into NPA in 3QFY22, while the...

PNBHF reported a 2QFY22 PAT of INR2.3b (9% miss), which declined by 25% YoY and 3% QoQ. The miss was driven by lower-than-estimated NII on account of income reversals due to accelerated run-off in the securitized pool of loans and partly mitigated by lower credit costs. NII fell 25% YoY and 9% QoQ to INR4.7b (9% below our estimate of INR5.1b). Provisions at INR1.4b were below our estimate of INR1.8b....

PNB Housing Finance’s (PNBHF) Board has decided not to proceed with the proposed preferential issue of Rs40bn @Rs390 per share to Carlyle group, General Atlantic, SSG Group and other investors. Preferential issue has been held up for more than 4 months (after already taking over 2 years), due to the pending legal proceeding before SAT. Also, in an exchange filing, the company highlighted that there is lack of visibility or certainty as to the timeline for judicial determination of the legal issues and regulatory approvals were not expected to be forthcoming amidst litigation. With proposed deal being off the table, the overhang resurfaces.

PNBHF reported a PAT of INR2.4b in 1QFY22 (v/s INR2.6b YoY). The 45% beat was driven by lower-than-estimated credit costs (~0.9% annualized) and opex (47%/9% below our estimate). Asset quality deteriorated with Gross Stage 3 increasing by 155bp QoQ to 6%. Few corporate accounts in Stage 2 and under the SICR pool slipped into NPAs. Total restructured pool (under both OTR 1.0 and 2.0) stood at INR17.33b (~2.9% of loan assets). PNBHF is working on different initiatives to optimize costs, leverage digital...

PNBHOUSI reported a 3QFY21 PAT of INR2.3b (flat YoY; 13% beat). The beat was driven by stronger PPOP (13% above our estimate). Opex fell ~26%/7% YoY/ QoQ. Credit cost stood at INR2.6b v/s our estimate of INR2.3b. In 9MFY21, PPOP/PAT fell 6%/10% YoY to INR15.3b/INR8b....

23 July 2020 PNBHOUSI reported 1QFY21 PAT of INR2.6b (v/s est. The beat was driven by stronger PPoP and significantly lower credit cost. AUM remained sequentially stable at INR835b. Given the high leverage, we expect the company to continue to run down its balance sheet until it raises fresh equity capital. Maintain Neutral, with TP of INR210. As disbursements were negligible, AUM remained sequentially unchanged at INR835b. The company did not sell down any loans in the quarter; hence, upfront assignment income was nil v/s INR1.2b YoY. Cost of funds is likely to further decline due to recent MCLR cuts by banks. The GS3 ratio remained stable QoQ at 2.76%. While the company kept Stage 1 and 2 ECL provisions stable, it increased Stage 3 PCR from 36% to 40% QoQ. Collection efficiency stood at 9697% during the quarter and was largely stable each month.

15 June 2020 PNBHOUSI reported INR2.4b net loss (v/s est. of INR2.4b PAT) in 4QFY20, driven by higher-than-expected provisions. The company reported provisions of INR7.5b (v/s est. of INR1.4b), including COVID-19-related provisions of INR4.7b. Given the high leverage, we expect the company to continue to run down its balance sheet. We increase our FY21 credit cost estimates by 70bp. Maintain Neutral, with TP of INR190. Given the lockdown in the last week of the quarter, disbursements were muted at INR28b. Interestingly, the retail home loan book declined 5% QoQ. On the other hand, the retail GNPL ratio doubled YoY to 1.