PNB Housing — Q1 FY26 earnings call

Call held 22 Jul 2025

Management summary

PNB Housing delivered a strong Q1 FY26 performance characterized by robust growth in high-yield segments and significant asset quality improvement. The company is intentionally slowing its Prime segment to protect margins while aggressively expanding in Affordable and Emerging markets, which now constitute 37% of the retail book. Management raised its full-year NIM guidance to 3.7%, reflecting confidence in their ability to manage spreads despite a declining interest rate environment.

Highlights

  • PAT grew 23% YoY to ₹534 crores in Q1 FY26

  • Retail loan book increased by 18.1% YoY to ₹76,923 crores

  • Gross NPA improved to 1.06% from 1.35% a year ago

  • Net Interest Margin (NIM) remained stable at 3.74% despite interest rate volatility

  • Affordable housing segment (Roshni) loan book surged 143% YoY to ₹5,744 crores

  • Credit cost was negative at -27 bps due to recoveries of ₹57 crores

  • Incremental cost of borrowing declined by 39 bps to 7.44% during the quarter

Key financials

  1. Net Interest Income ₹760 Cr +17%YoY
  2. PAT ₹534 Cr +23%YoY
  3. NIM 3.7% -0.27%QoQ
  4. Gross NPA 1.1% -21.5%YoY
  5. RoA 2.6% +0.78%QoQ
  6. CRAR 29.7%

What they filed

Q1 FY27: revenue up 9.0%, net profit up 4.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,879 1,942 2,022 2,076 2,128 +13%2,119 +9%2,182 +8%2,263 +9%
Net profit470 483 550 534 582 +24%520 +8%656 +19%557 +4%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Roshni (Affordable)
    ₹5,744 Cr Loan Book143% YoY Growth12.1% Incremental Yield0.3% GNPA
  • Emerging Markets
    32% Disbursement Growth35 bps Yield Premium over Prime
  • Prime
    1% Disbursement Growth8.5% Book Growth

Guidance & targets

Margin

  • NIM Guidance FY26 Margin · FY26 · High confidence 3.7%

    Previously 3.6-3.65% → 3.7%

    earlier I had guided between 3.6% to 3.65%, so now we are upping the NIM guidance to around 3.7%.

    — Girish Kousgi, MD & CEO

Volume

  • Total Loan Book Growth Volume · FY26 · High confidence 15%
    we have guided book growth of 15% for this year and that will definitely be met.

    — Girish Kousgi, MD & CEO

  • Affordable Loan Book Target Volume · FY26 · High confidence ₹9,500 crores
    we are confident of closing the financial year with a loan book approaching INR 9,500 crores.

    — Valli Sekar, Chief Sales & Collection Officer

Profitability

  • RoE Target Profitability · next 3 years · Medium confidence 14%
    I think in about let's say three years or so, we should get to around 14% odd.

    — Girish Kousgi, MD & CEO

  • Steady State RoA Profitability · beyond FY27 · Medium confidence 2.5%
    So, that would help us to maintain a ROA of 2.5% beyond ‘27 as well.

    — Girish Kousgi, MD & CEO

Market Share

  • Branch Expansion Market Share · Annually · High confidence 40-50
    We plan to add 40 to 50 branches annually. That is the plan for this year as well.

    — Girish Kousgi, MD & CEO

Risks & concerns

  • Seasoning of Affordable Housing book

    medium

    The Roshni book is maturing (started Jan 2023), leading to expected rises in 30+ and 90+ DPD delinquencies, though management expects peak NPA to stay around 1.1%.

    Both acknowledged

  • Interest rate transmission pressure

    medium

    Pressure to pass on rate cuts to customers (10 bps passed on from July 1) could compress yields before borrowing costs fully reprice.

    Analyst acknowledged

  • Normalization of credit costs

    medium

    Current negative credit costs are unsustainable; steady-state costs of ~25 bps are expected in 5-6 quarters.

    Analyst acknowledged

Areas of evasion (1)

  • Specific rollback rates for the Affordable segment were not provided immediately.

Q&A highlights

2 direct
Offsetting credit cost normalization Direct
we plan to take NIM to about 4% to 4.1%. So, that will offset... we are increasingly trying to increase the share of origination from Affordable and Emerging.

Explains how the company will maintain profitability once the current windfall from provision write-backs ends.

Asked by Renish Bhuva, ICICI

Muted growth in Prime segment Direct
it's going to be in single digit this year and this is as per plan. And this is our strategy not to grow the Prime book faster. It will always be a balancing number.

Confirms a strategic pivot away from low-margin Prime business to protect overall NIM.

Asked by Abhishek Jain, Alfaccurate

Yield not reflecting mix shift Partial
With the repo going down, so obviously, our yield also would get moderated to a certain extent... we do not have too much of control on the cost of borrowing or on the yield, but we have full control on the margin.

Highlights the impact of the interest rate cycle on headline yields, even as the portfolio mix improves.

Asked by Suraj Das, Sundaram Mutual Funds

2 min read 5 chapters

Detailed narrative

Strategic Pivot to High-Yield Segments

PNB Housing is undergoing a deliberate structural shift in its portfolio, prioritizing profitability over pure volume in the Prime segment. Prime disbursements grew by only 1% YoY as management intentionally slowed this vertical to protect margins. In contrast, Affordable (Roshni) and Emerging Markets segments saw disbursement growth of 30% and 32% respectively, now representing 50% of total quarterly originations. This mix shift is the primary lever for the company's target to expand NIM to 4.0-4.1% in the medium term.

Asset Quality Resilience and Recovery Windfalls

The company reported a significant improvement in asset quality, with Gross NPA dropping to 1.06% from 1.35% YoY. This was bolstered by ₹57 crores in recoveries from retail and corporate pools, leading to a negative credit cost of -27 bps. While management acknowledges that these reversals will normalize to a credit cost of ~25 bps in 5-6 quarters, they are confident that the seasoning of the Affordable book will result in a peak NPA of only 1.1%, which is well below industry averages.

Margin Management in a Declining Rate Environment

Despite the RBI's 50-bps repo rate cut to 5.5%, PNB Housing maintained a stable NIM of 3.74%. The company successfully reduced its cost of borrowing by 8 bps to 7.76%, with incremental borrowing costs falling even further to 7.44%. Management has proactively passed on a 10-bps rate cut to customers via its PNBHFR, effective July 1, 2025, while simultaneously raising its full-year NIM guidance to 3.7% due to efficient liability management.

Affordable Housing (Roshni) Momentum

The Roshni business continues to be the fastest-growing engine for the company, with the loan book reaching ₹5,744 crores, a 143% YoY increase. Incremental yields in this segment improved to 12.1%, driven by a focus on Tier-3 and Tier-4 markets. Management has set an ambitious target to reach a ₹9,500 crore loan book for Roshni by the end of FY26, supported by a dedicated network of 200 affordable-focused branches.

Operational Efficiency and Network Expansion

The company is maintaining tight control over its cost structure, with Opex to ATA standing at 1.02%, well within the guidance of 1.0-1.1%. PNB Housing reclassified 20 Prime branches to the Emerging segment during the quarter to better capture high-yield opportunities. With a total Pan-India network of 356 branches, the company plans to continue adding 40-50 branches annually, focusing on locations with high potential for Emerging and Affordable business.

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