PNB Housing Finance Targets Ambitious 17% Growth in FY25 Loan Portfolio

In a strategic move to enhance its financial services, PNB Housing Finance is setting its sights on a minimum 17% growth in its loan portfolio for FY25, marking its most significant expansion since 2019. The company, bolstered by a robust capital position, has shifted its focus predominantly towards retail lending, which now constitutes 97% of its business, including a significant emphasis on the affordable housing sector.

Girish Kousgi, the Managing Director of PNB Housing Finance suggested that the company plans to augment its retail book by 17% in FY25. He noted that the overall loan growth is expected to surpass this figure once corporate lending resumes. The firm witnessed a 10% annual increase in overall loan assets, reaching ₹65,358 crore at the close of FY24, with retail loans experiencing a 14% rise — the highest in the past five years.

The company's affordable housing loan segment, initiated 15 months ago, currently stands at ₹1,790 crore. In contrast, the corporate loan book saw a 46% reduction in FY24, totaling ₹2,052 crore, as the company underwent a balance sheet cleansing exercise.

Kousgi, during a post-earnings call with analysts, shared plans for the expansion of the company's branch network. He highlighted that 50 new branches would be established in the emerging market segment, expected to yield higher returns. He estimated that around 40-42% of the incremental business would stem from affordable and emerging segments, while the remaining 58% would be sourced from the prime segment. Kousgi reassured stakeholders of the company's strong capitalization, which he believes will support growth for the next two and a half years based on current projections.

Following a successful rights issue in May of the previous year, which raised ₹2,494 crore, the company's capital adequacy ratio was bolstered to 29.3%. Despite a slight decrease in net interest margin to 3.65% in the fourth quarter ending March 31, 2024, from 3.74% in the corresponding period the previous year, primarily due to the reduction of the corporate book, the lender aims to maintain the NIM around 3.5% in the coming year.

Currently, PNB Housing Finance operates 300 branches. Of these, 160 are dedicated to affordable home loan borrowers, 50 to the emerging segment, and the remaining 90 to the prime segment. The company has strategically organized different verticals to maintain a focused approach on the retail segment.

The prime segment primarily offers housing loans and loans against property through 90 branches in metro and tier-1 cities, featuring an average loan size of ₹35 lakh and interest rates between 9-10%. The emerging markets business targets high-yield segments in tier-2 and tier-3 cities, with interest rates ranging from 10-11%. Meanwhile, the affordable housing segment provides housing and non-housing loans with an average loan amount of ₹15 lakh at interest rates of 11-14%.