PNB Housing Finance receives positive outlook from brokerages

Despite a 2% dip in PNB Housing Finance shares on October 25, following a robust Q2FY24 performance, brokerages have expressed optimism due to the company's effective stress management and the expectation of reduced borrowing costs. Over the last month, the housing financier's stock has surged by 10% compared to the Sensex's 2% decline.

Morgan Stanley, a global brokerage firm, issued an 'overweight' rating with a target price of Rs 880. Analysts note that PNB Housing's balance sheet has notably improved after using a substantial recovery from large corporate non-performing loans (NPLs) to clear retail gross NPLs.

In Q2FY24, PNB Housing's gross non-performing assets (GNPAs) dropped to 1.7% from the previous year's 6.06%, while net NPA decreased to 1.1% from 3.5%.

The increase in average borrowing costs impacted net interest margins (NIMs), which fell by 20 basis points (bps) YoY to 3.9% in Q2FY24. However, management anticipates a decline in borrowing costs, which could lead to potential NIM expansion in future quarters.

Total disbursements for the quarter saw a 16.3% YoY surge, and the total loan book increased by 5.3%. The company's outlook remains positive, with a projected 17-18% YoY growth in retail loans and a 22% YoY increase in retail disbursements.