PNB Housing Finance set to prune corporate loan book by Rs 1,500 cr

Mortgage lender PNB Housing Finance (PNB HFC) plans to reduce corporate loan book by Rs 1,500 crore by March 2021 and is going in for a second round of rationalisation.

Hardayal Prasad, managing director (MD) and chief executive officer (CEO) said the company has built a strong balance sheet and will continue to rebalance its portfolio to build a robust retail franchise.

There was a sell down and accelerated pre-payment of Rs 477 crore in the corporate book. 

"HFC remains steadfast in its strategy to bring down share of corporate book by end of the current fiscal year," Dayal said in an analysts’ call.

The company is closely monitoring its corporate book and many accounts are in various stages of resolution. Some of these resolutions are expected to fructify during the current financial year.

Assets under management (AUM) stood at Rs 81,221 crore as on September 30, 2020, compared to Rs 83,495 crore as on June 30, and Rs 89,471 crore as on September 30, 2019. Retail loans contribute 82 per cent and corporate loans are 18 per cent of the AUM. Total corporate loan book was Rs 14,331 crore in September 2020.

On a sharp fall in AUM on a sequential basis, he said the book has run-off and almost all banks have reduced interest rates. The company’s ability to reduce rates remains different (limited) because the HFC does not have low-cost money – CASA – current account and savings account. 

Hence, PNB HFCs rate reduction has not been up to the mark. The differential between other financiers (banks) and PNB HFC has increased.  

The company is working on a strategy to hold on to the book by improving efficiency in new acquisition and explaining to customers why they should stay with the company, said Dayal.

The company has initiated cost rationalisation steps. Its operating expenditure in Q2 of FY21 declined by 19 per cent to Rs 107 crore from Rs 132 crore in Q2 of FY20.