PNB Housing: Margins will continue to be under pressure even in medium term

PNB Housing's managing director Sanjaya Gupta believes that new business will give it better yields and limit the pressure on spreads

The stock of PNB Housing Finance (PNB Housing) has declined by over three per cent after the company announced its June quarter results last week. Given the Street’s concerns on profit margins, the stock is likely to remain under pressure. 

While the company clocked strong growth in loan book (47 per cent year-on-year) and asset quality was also satisfactory (gross bad loans flat at the year-ago level of 0.43 per cent), a net interest margin (NIM) compression, amid lower spread, disappointed investors. 

A 38 basis point dip in average yields led to a 36 basis point year-on-year contraction in reported NIM to