PNB Housing Finance rating ‘hold’: PAT saw a miss, growth in disbursal moderated

pmb, pnb housing financeSpread up q-o-q, but should moderateSpread (ex assignment) was 213bps (-13bps y-o-y).

Q2 PAT rose 33.2% y-o-y to Rs 2.53 bn, a 8% miss vs. our estimate due to higher credit cost and tax. Loan disbursal moderated in Q2. ALM gap exists but CP mix fell in Q2. We expect ALM mismatch (<1 year), higher CP mix to affect loan growth and spreads. EPS growth should decelerate and RoA may be capped. Asset quality is stable, but exposure to stressed developer segment is a risk. Stake sale overhang persists, but at 1.7x FY20e BV, we see limited downside. Hold.

Loan growth still strong; but disbursal decelerates AUM grew 43% y-o-y. Disbursal growth slowed to 14% y-o-y (Q1 25% y-o-y) due to (i) slowdown in home loan (HL) disbursal and (ii) deliberate slowdown in LRD (Lease Rental Discounting) disbursal, due to tighter liquidity. PNBHFL continues to add branches (+12 in 1H FY19), but we believe PNBHFL’s disbursal growth will moderate due to tighter liquidity. We forecast AUM growth of 31% CAGR over FY18-21e.

Spread up q-o-q, but should moderateSpread (ex assignment) was 213bps (-13bps y-o-y). Reported yield rose 10bps q-o-q to 9.94%. Average borrowing cost rose 8 bps q-o-q to 7.81% (+5bps y-o-y). Marginal funding cost in Q2 was 8.2-8.3%. This should rise in coming quarters. PNBHFL had raised HL by 15bps in Oct. Mgmt expects to maintain spreads of 205-215 bps, but we expect 22 bps spread compression over FY18-20e.

ALM mismatch exists, CP mix decline a positive

PNBHFL has asset–liability mismatch (ALM) gap of Rs 5.3 bn in 1-3 month bucket and cumulative ALM gap of `9 bn in less than 12 month bucket. We do not see major liquidity issues near term as it has over `40 bn of cash/liquid investments as of Sept 18. Mix of CPs in overall borrowings fell to 13% from 16.9% in Q1, while bank borrowings have increased to 22% (17.5% Q1). CP refinancing needs are limited till Dec as per mgmt.

Asset quality steady, credit costs rise

GNPA/S3 assets was stable q-o-q at 0.45% (Q1 0.43%). Credit cost rose 11 bps q-o-q to 40 bps vs. our 33bps estimates. Exposure to stressed developer Supertech is `2.8 bn, but the loan is not an NPA as per management.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Source: Financial Express