PNB Housing Fin Q2 profit up 33% to Rs 2.53 bn over high-interest income

PNB Housing Finance posted a 33 per cent rise in its net profit to Rs 2.53 billion for the second quarter ended September 30, as against Rs 1.9 billion in the corresponding quarter of the previous fiscal.

Loan disbursements increased by 14 per cent, year-on-year, from Rs 73.85 billion in Q2 FY18 to Rs 84.05 billion at the end of Q2 FY19. Out of this, 70 per cent are housing loans while 30 per cent are non-housing loans.

Asset under Management grew by 43 per cent from Rs 513.2 billion as of H1 FY18 to Rs 734.8 billion at the end of H1 FY19.

On the retail side, 58 per cent of loans went to individual housing loans while 12 per cent was for construction finance. In the non-housing segment, 16 per cent of loans were loan against property, 5 per cent lease for rental discounting and 8 per cent for corporate term loans or Non-residential Premises Loans.

Net Interest Income grew by 25 per cent over the past year, from Rs 3.7 billion in Q2 FY18 to Rs 4.63 billion at the end of Q2 FY19.

Sanjaya Gupta, managing director at PNB Housing Finance said, “the financial sector volatility that started in H1 FY18-19 continues to exist in the market especially with respect to liquidity. We envisaged tighter liquidity scenario and maintained higher cash and liquid investments on our balance sheet all throughout H1 FY18-19 and also reduced our dependency on short-term paper to 11.7 per as of September 30, 2018 from 17.5 per cent as of March 31, 2018. We continue to do our business with a focus on asset quality, profitability and a balanced portfolio.”

The deposit portfolio grew 20 per cent to Rs 124.6 billion at the end of Q2 FY19, compared to Rs 104.05 billion in the corresponding quarter of the previous fiscal.

Net Interest Margin stood at 2.72 per cent for Q2 FY19, compared to 3.01 per cent at the end of Q2 FY18, while the spread on loans has come down by 5 basis points to 2.22 per cent for Q2 FY19 as against 2.27 per cent for Q2 FY18.

This indicates that the company has been impacted by a risen cost of funds while interest income has continued to grow, on a year-on-year basis.

Cost of funds for many financial companies has risen in one part due to a 50 basis point hike in the policy repo rate by the Reserve Bank of India in June and August of this year.

Average Cost of borrowing for the company stood at 7.81 per cent at the end for H1 FY19 as against 7.76 per cent

The other reason for rising cost of borrowing for non-banking lenders is the recent rise in corporate bond yields and a decrease in market demand for debt instruments after concerns over asset-liability management (ALM) mismatches were raised.

PNB Housing Finance recently raised Rs 17.8 billion through commercial papers on October 22.

A company spokesperson said, “[The company] is comfortably placed with respect to the ALM position. In the 0-1 year bucket, we are broadly matched on ALM…On 1-3 year bucket, we are borrowing long-term [through] External Commercial Borrowings (ECBs), and more sticky public deposits and are comfortable with our mix. Further, our borrowing in the last one month represents our strength in the borrowing market as we raised more than Rs 60 billion through CPs and $200 million through ECBs under the automatic route.”

The company expects to have Rs 36.85 billion in cash (liquidity) by the end of H2 FY19.

Total borrowings stood at Rs 636.3 billion at the end of Q2 FY19, as against Rs 450.7 billion at the end of Q2 FY18, registering a growth of 41 per cent over the last year.

According to the investor's presentation, the company has a pipeline of future borrowings to raise Rs 210 billion by the end of this fiscal year. Around Rs 30 billion would be raised through ECBs, Rs 60 billion from securitization, Rs 100 billion for long-term bank borrowings and Rs 20 billion from non-convertible debentures.

Total provisions stood at Rs 3.85 billion as at the end of Q2 FY19  as compared to Rs 2 billion in the corresponding quarter of the previous fiscal year. The company has kept Rs 1.45 billion aside “as a steady state provision for unforeseeable macroeconomic factors.”

Gross Non-Performing Assets (NPA) stood at 0.45 per cent for Q2 FY19 compared to 0.34 per cent at the end of Q2 FY18. Net NPAs also rose from 0.26 per cent in Q2 FY18 to 0.35 per cent at the end of Q2 FY19.