Ladies and gentlemen, good day, and welcome to the PNB Housing Finance Limited Q3 and nine months FY 2022-2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Deepika Gupta Padhi, Head of Investor Relations and Treasury. Thank you, and over to you.
Thank you, Yashashri. Good evening, and welcome everyone. We're here to discuss PNB Housing Finance Q3 and nine-month FY22, 23 results. You must have seen our business and financial numbers in the presentation and the press release shared with the stock exchanges and also available on our website. With me, we have our entire management team across verticals, led by Mr. Girish Kousgi, Managing Director and CEO of PNB Housing Finance.
We will begin this call with the performance update by the MD and CEO, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations.
PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. A detailed disclaimer is on slide 26 of the investor presentation. With that, I will now hand over the call to Mr. Girish Kousgi. Over to you, sir.
Good evening, and welcome to the earnings call. I think we had a very good quarter. I think there were a lot of positives to, you know, take back and work further on it. If we basically talk about the numbers, on a YOY, disbursement has grown by 21%, nine months we've grown by 39%.
Book last quarter it was negative, it was minus 4%. I think now we are 0.3. If you look at retail, because the focus is going to be on retail, you know, going forward, I think it is 2% growth. If you, if I look at YOY retail, we are at 7%. On a nine-month, you know, we are at 7%.
Corporate book, as I had mentioned earlier also, we are de-growing. On a YOY, it is -39%. In terms of revenue, 20% quarter-on-quarter, and it's 2.5% nine months. PAT is at 43% quarter-on-quarter and 15% nine months. NIM is at 11.38%, last quarter was 10.7%. The cost of funds, you know, it has slightly gone up. It was 7.32%, you know, last quarter, and now it is 7.55%. We have improved spread from 3.38%-3.83%, NIM from 4.14% last quarter to 4.68% this quarter.
I think the big story is around, you know, traction business, both on disbursement and book and also on asset quality. If you look at asset quality, GNPA is now at 4.87%. If you compare this number last quarter, it was 6.06%, and the net NPA is now at 3.22%. If you talk about retail, specifically retail, GNPA is 2.86%, and net NPA is 1.96%. Corporate, as I mentioned, it's de-growing. If you look at CAR, it has improved. Now it is 24.6%. DR is at 4.89 months time. Largely the focus was on retail. We focused on few things. One is on the disbursement.
I can say that last two months, you know, there is very good traction and this would continue in future. In terms of book, we have done a great job in terms of retention. That has also helped us to grow our book. We have, to a large extent, controlled on the foreclosures, part closures and also BT out. We have tweaked our policy, trade policy to a certain extent, and also process to ensure that the book, what we're going to build in future is of pristine quality.
We've done some design level changes in terms of ticket size, in terms of product mix. You know, we are focusing now more on home vis-a-vis compared to non-home. In terms of profile, we are now focusing more on salaried vis-a-vis compared to SE and PE.
Within salaried, you know, the focus is now also on, you know, government employees, which is a very small portion in our portfolio because this segment will give us the least delinquency. Therefore, we want to do that shift within salaried. We have now changed our strategy in terms of focusing on retail granular business.
To that extent, you know, high ticket loans, I think it has come down drastically, directionally. Going forward, I feel we can see this, you know, in the book, what we are going to build in future. Today, retail disbursement accounts to 92% of the book. In terms of affordable, we have now set up an entire team. We have a dedicated team starting from sales, credit, operations, collections.
The entire architecture is different. The policies are different and the set of branches, channel partners, segments, I think everything is different. Starting from pricing, you know, to segment employees are from affordable background. The entire architecture is different for affordable. We have started this, you know, in last week of December, so probably this quarter we'll be able to see some traction there and it will, you know, carry on going forward.
I had mentioned in the past, last quarter I'd mentioned that incrementally going forward, affordable, you know, will contribute about 25% of business. Which is, let's say, 12 months from now, you know, it'll start contributing about close to 20%-25% of incremental business. That's our focus on affordable. It has started very well.
Of course, the book growth would have been slightly higher, but of course, we had certain subsidy amount to, you know, adjust to see this is on PMAY, right? Therefore, the book growth, what you see is little less. Otherwise, the book growth would have been a very, you know, it could have been far better than what you see now. We have done few changes in the sales structure.
We are now much more closer to market and, you know, we've added more, if I can say, more zones, more regions so that we are much closer in terms of tracking, monitoring, and business development. On the credit side, we are working on automation and distribution. We have launched STP. We just launched now STP, straight through process. This is for salaried segment.
This would, give us, you know, faster TAT and efficiency in trade underwriting and standardization. This will, pick traction in next couple of quarters. In terms of policy, as I mentioned, we have done some tweaking just to ensure that the book, what we're going to build in future will be of very good quality. We have tweaked certain processes.
We have tried to cut down on some of the redundancies and improve efficiency. In terms of collection, the collection, strategy is very, very clear. We have now four different verticals under collection. One is completely focusing on bounce and X bucket, where we have seen significant improvement in the collection efficiency.
For the entire SMA pool, that is SMA-0, SMA-1, and SMA-2, we have a different set of team managing this to ensure that the slippages are the lowest. In fact, quarter three saw significant reduction in the slippages. The slippages was down to the extent of 25%. The 90 plus, which is basically NPA, 90 plus to 360 will again have a different dedicated team, and 360 plus will have recovery. We will have X-bucket, SMA, NPA, and recovery. This tactically, we have done this tactically. We've done this bifurcation within the collection architecture. We've had highest NPA recovery. The slippages have come down by 25%.
We have fast-tracked the entire legal process in terms of surfacing, in terms of settlements, in terms of sale of assets. I think all these things have, you know, resulted in asset quality improving, especially on the retail front. What we've done is, as I mentioned, we have now slowly trying to change the profile mix, product mix, and also in terms of ticket size, now we are trying to get more granular, and we want to focus on retail business. We've seen some improvement, you know, in terms of the mix what we want. It's hardly, of course, one quarter, so it will take some more time to see this impact coming in. Our salaried share has increased incrementally.
Our profile in the product mix, we've seen that HL is gaining more traction even compared to non-HL. In the ticket size, we are seeing that up to INR 1 crore, the percentage of cases which are being booked are on the increasing side. I would now open the forum for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, please wait for a moment while the question queue assembles. We have our first question from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yes. Good evening, everyone. Thank you for taking my question. Congratulations on a good quarter. Just two or three questions. Firstly, on the corporate book, have there been any NPA resolutions that you've seen in this quarter, among those four or five large accounts? Secondly, during this quarter, I think you've in your disclosure, you've talked about some impairments or provisions that you've taken on assets held for sale. I mean, if you could just kind of throw some more color on what is the quantum of this assets held for sale, and what have you actually classified under assets held for sale?
On margins, just wanted to understand, last quarter it seemed like there is a runoff in the margins and probably something that should kind of normalize in this quarter. Seeing margin expansion in this quarter as well in a rising rate environment, I mean, very, very counterintuitive. If you could kind of just explain what has happened there.
I mean, how is it that we are looking at margins expanding and how long kind of you want to suggest that this, I mean, maybe this one-off from this assignment loans can continue. Lastly, sir, on the OpEx side, I think on the affordable bit, you have said that you've added about 81 branches during this quarter, if I kind of heard you right.
Wanted to understand that how should we look at OpEx when there are so many branches which are getting added, so many, I mean, this entire affordable team that we have built up, I mean, why is it not reflecting in the OpEx numbers that we've reported? Thank you.
Right. Less than before. It's not really. You see resolution both in NPA and non-NPA pool in the corporate. In terms of margins, you know, I had mentioned that for the profile like PNB Housing, we should look at NIM of 3.2 on spread of 2.2. Currently, NIM is at 4.68 and spread is at 3.83. You know, the guidance is 3.2 and 2.2. In terms of assignment, you know, basically, this is a lag effect. Sometimes it is plus, sometimes it is minus.
The only thing is it evens out, you know, in a year's time, and therefore, I think that is something part of business, and we should continue with that. In terms of OpEx, I think whatever OpEx we are seeing now, that is I think most of the OpEx of affordable, you know, vertical is already built in. What you're seeing now is most of it is part of, you know, what is already built in.
Now all the branches are operational and most of the spends are already done. In terms of asset held for sale, I think we had a small pool, you know. That is, we have just marked it down to the value, to realizable value, and that is the impact what you can see in PNL. There is a bit of charge to PNL, that is what you can see in the PNL.
What is the quantum of, I mean, these assets, which are held for sale?
It was roughly INR 100 crores. It is now completely marked down to the realizable value. It is one-off instance you can say. These were some legacy assets.
These are not your NPA accounts? This 100 crore INR, what you said, these are not the NPA accounts.
Yeah, they were not NPA accounts. Those were current assets held for sale.
Sir, I mean, on that corporate NPA resolutions that I asked, I mean, I kind of missed you. I mean, there were no resolutions during the quarter is what you're saying?
No, no. There was some resolution, which was both in NPA and non-NPA pool, but the amount was quite less. Therefore, you know, I think the quantum is not huge. Having said that, on the corporate side, we are working on resolution. As I mentioned earlier, it will take about four to six quarters for us to completely come out of the entire corporate NPA pool.
We are working on account by account on resolution, and we see lot of, you know, positive, you know, feelers what we're getting in terms of resolution. That could start happening in next four to six quarters. Unless and until, you know, if there is some kind of one-offs, you know, which probably we might look at. We're open to all. We're open to all the options.
Got it. Sir, just a follow-up question on the margins. I understand your guidance was more around, I think, margins of 3.2%. Finding it a little difficult to understand that until, I think, the first quarter of this fiscal year, margins were around about 2.36, is what I'm seeing in front of me, and they are about 4.68 now. Other than, I would say, this one time gain that we are getting from the assigned pool, there is other than that, no one-offs and it just expanded from 2.36 to 4.68 now?
Yeah. That's right. That is right. See, I'm talking on a steady, long-term steady state. I'm not talking about next two, three quarters. If you have to look at both spread and then the next two, three quarters, I don't think so you would not see much of a change what you are seeing now. If I have to talk about the long-term guidance on a steady state business, I think, normalized NIM and spread would be in the, you know, range what I mentioned.
Got it, sir. I'll come back in the question to you. Thank you very much for patiently answering my questions.
Thank you. We have our next question from the line of Sharaj Singh from Laburnum Capital. Please go ahead.
Hi, sir. Thank you for the opportunity, and congratulations on the good numbers. The first question is on the disbursements. It's actually falling Q over despite the expansion we've taken. The guidance you've given, we require around INR 5,000 crores of disbursements quarterly rate. How do you look at that?
I can only say that in last two months we have seen very good traction on disbursements and also on the closures. Though I had mentioned the last quarter that we are looking at a big growth of about close to 10%, especially on the retail, I think we will be able to hit that number because now we are at about 7%. I think with quarter four we'll be close to about 10%. Guidance from next year onwards, I had mentioned that disbursement will be 20%-25% and book would be about 17%.
20%-25% of the, loan book?
No, no. Yeah, yeah. Yeah, correct. On the loan book.
Okay. Okay. The second question is on the yields. We've seen a 90 basis expansion on the yields excluding securitization. How much of this is for the NPA reversal and how much is the rate pass-through?
Sorry, I didn't get your question. You were talking about.
Yields. The loan book yields excluding securitization.
Uh.
They've expanded by around 90 basis.
Correct. It will be less than 100 basis, that's the gap. Sometimes it is, you know, 70, sometimes it is 80 basis, yeah.
Right. How much of this is attributable to NPA reversals and how much of this is to, pass-through of the rates?
NPA... no, I didn't get your... I didn't get your point. What is NPA reversal?
NPAs have gone down from 6% to 4%, right? Sorry, 4 point some cents on the entire book, right? 4.9%, 4.87% from 6.07% QOQ.
Yeah, correct. That is because of few things. One is the slippages have been controlled, and there is a NPA recovery, and there are, you know, certain one-offs, you know, in both retail and corporate.
Actually, what I'm trying to understand is if I look at the yields which have gone up by 90 basis points, some of this would have come from the NPA reversals which have taken place, right? What is this portion which could be attributable to these reversals, the expansion yields?
There is no correlation between NPA reversal and the yield per se. Whatever recoveries we have done, I mean, in proportion, this is a portfolio yield we're talking about.
Right.
I don't understand. Yeah.
Okay. Okay. One question on the cost of funds side. I understand that 65% of our borrowings are floating rate. From this floating portion of the borrowing, how much of the rate hike is yet to play pass-through, play through? All the floating rate borrowings have been completely, uh-
Yeah. It has been fully passed on to our customer.
On the cost of funds, the borrowings have been reset completely or there are some borrowings which would reset in the upcoming quarters? I'm talking about just the floating part.
most of it is done and we have, you know, quite a bit of pool which will happen in next few quarter, few weeks.
Q4 being by full pass through. Will I be fair?
Mr. Sharaj?
Yeah.
Sorry, you're not clearly audible. Can you use the handset?
We're not able to hear you properly. Sorry. Is it better now?
Yes, please go ahead.
Yeah. right. One question on the provisions. The total provisions have come down, QOQ from INR 2,100 crores to INR 1,760 crores. Have we taken any write-offs during the quarter?
We have taken write-off, you know, a small pool in retail and a small pool in corporate as well.
Okay. Okay. One last question on the AFS asset markdown. What is the nature of these assets? Are these treasury assets or like what is the nature of these assets?
These were certain current assets, basically repossessed assets which were, we were holding for sale, and these were some legacy assets, very old, which are now getting, you know, we are planning to dispose them off.
Okay. Okay. Thanks. I will come back. Thank you.
Thank you. We have our next question from the line of Anand Venugopal from BMSPL Capital.
Yeah. Thanks for the opportunity. My question is in regards to, our provisions still remain high and hence we are not able to achieve good ROEs. How do we get to a 15% ROE from here?
Basically, if you look at the provision, you know, Leaving the, right, leaving the one-off, it is quite less. In the last quarter, I had mentioned that for this year, you know, credit cost will be about 1%, right? This is, maybe from coming year onwards, and just for a minute leaving the corporate book aside, I'm talking about retail, I think it will start normalizing because we have seen lot of traction on the retail NPA. Corporate NPA also we are seeing, you know, good visibility. Only thing is that timeframe is little longer given the nature of those accounts and the size of the, you know, loans, right?
Basically, when we talk about credit cost, we should ideally look at, you know, the slippages and, you know, the stage movements, right? I think these two are something which we need to worry about. If it is, if it is a one-off and if because of that if the credit cost is going up, see even in that case we are talking about overall nine months of credit cost 1.13%. For the whole year we'll be able to maintain 1%. you know, unless there is a one-off.
In terms of our focus now being on retail and within retail, not just prime, even the affordable, there is a clear guidance given on in terms of disbursement growth and book growth and also in terms of margins. I think, you know, next few quarters we'll see good traction on all the parameters of what I mentioned now, be it growth in disbursements or growth in book or profitability. I think in all these things there'll be good traction. I think I will leave that for you to work out on the ROE. Yes, I'll give you the guidance and, you know, outlook for next few years.
Got it. All good. Thanks.
Okay.
Thank you. We have our next question from the line of Ashwini Agarwal from Demeter Advisors LLP. Please go ahead.
Good afternoon, team. Congratulations on an excellent set of numbers. I was, you know, intrigued on, about your opening comments and how your renewed focus is going to be on salaried and within salaried, on government employees. So two questions here. I mean, this is more or less a space which, where the PSU banks and the large commercial banks are very active in.
Therefore, you know, from a strategy perspective, if you go back into the market, which is already very keenly competed for, what is the edge that, you know, PNB Housing brings? Because, you know, as a standalone housing finance company, your cost of funds are not as competitive as they are for the banks. So why go there?
Why not focus on the self-employed category, which obviously is more difficult to manage but at least has a profile where the competition is somewhat discreet. Could you help me understand the reason behind the change in strategy?
Very good question, sir. I think, you know, we have seen for last many decades in this industry, self-employed as a profile, compared to salaried is highly delinquent, A. B, also the book attrition is higher in the self-employed segment. Now, when we talk about retail, we are looking at salaried as a profile to increase salaried profile.
Now, in salaried, there are two things. One is, you know, if you focus on slightly higher ticket size, which is very safe, for example, INR 1 crore, INR 2 crore, there we will have, you know, book depletion pressure, right? Therefore, let's say we focus on INR 30 lakhs, INR 40 lakhs ticket size, which is basically from salaried.
This is the space, this is a segment where we see that, you know, this segment is not that price sensitive and therefore our strategy very well, our pricing strategy very well fits in. A. B, there won't be depletion pressure. Number three, today, if you look at all the housing finance companies, you know, all the small banks, I think their focus is on this.
Our USP would be, A, in terms of our digital strategy, you know, where we can, you know, direct customers to us. A. B, we have doorstep service. Number three, our advisory to customers, especially on the legal and technical front. Our TATs, you know, we always ensure that our TATs are far, you know, is very competitive in the market.
Therefore, I think looking at all these things, you know, we have an advantage, A, in terms of being present there. Through doorstep service, we can increase our book at a higher yield with less book depletion. Also, you know, we are able to see this particular segment on the asset quality side behaving very well.
Okay. I, maybe I misheard. I thought you said that your focus is going to be INR 1 crore loans in your opening remarks.
No, no, no. What I said was our focus is going to be on both salaried and self-employed. But within the entire profile mix, we would be slightly skewed towards salaried, which means we will be increasing our share in salaried. Within salaried, we will focus on all the segments, but yes, we would also focus on INR 30 lakhs-INR 40 lakhs of ticket size.
Now, this is a vast segment where on the private side, Cat B, Cat C employer, employees would cater to. On the government side, this is a typical segment, you know, where the book is very good, the book depletion pressure is quite low, and this set of customers are not that rate sensitive, and therefore it fits into our pricing strategy. We will focus on all.
We would ideally keep the ticket size around INR 26 lakhs-INR 27 lakhs. This chunk could be major portion for us within salaried.
Okay. Sir, could you also explain the focus on the affordable side, what kind of customers you're looking at? What's the average ticket size that you're looking at, and who is the real competition there, and how do you differentiate yourself?
Sure. On the affordable side, basically in terms of geography, there is opportunity in metros, big cities and Tier 2 and Tier 3 towns. For example, if it's a metro, we're talking about, you know, the entire periphery, the outskirts. There we have very good opportunity. In terms of segments, basically focusing on, let's say, if you talk about developer, you know, Cat C, good Cat C and good Cat D developers.
In terms of profile, it will be, let's say both private and government employees whose income is in the range of, let's say, INR 40,000-55,000. In terms of affordable, our ticket size is going to be INR 16-17 lakhs. On the prime, it will be INR 26-27 lakhs. On affordable, INR 16-17 lakhs.
In terms of affordable, I think we would benchmark with some of the listed affordable companies whose ticket size in the range of about 20, 22. I think 80%... 70%-80% of that would be our affordable, you know, segment.
Which is the reason why you're kind of signaling to a lower sustainable NIM in the long run, but that hopefully will be offset by lower OpEx to total assets as the asset growth takes place and lower credit cost, thereby driving up the ROE. Is that how I should see it?
Actually, if you see, you know, the margins in last few quarters, it is really varying. It is fluctuating. Therefore, you know, with respect to guidance, what I said was, this is the minimum what we are going to protect. This is the minimum what we're going to protect. If everything goes well, obviously we'll be able to maintain this and, you know, probably it will be much higher than what I mentioned.
Oh, okay. Thank you, sir, and all the best.
Thank you.
Thank you. We have our next question from the line of Vikram Damani from Damani Securities. Please go ahead.
Good evening. Can you hear me?
Yes, please go ahead.
A question regards to the rights issue. You said in your press release that the draft letter was filed back in November. Any updates on when we can expect further clarity and what are we planning in terms of quantum pricing, et cetera?
We are awaiting, you know, confirmation from SEBI to take this forward.
Any idea, sir, as to how long that might take? Any internal timing, anything you can throw light on?
I think there was some, you know, queries which were resolved, you know, our overall timeframe is by end of March or so, or it might just slip to, let's say, first week or second week of April. At this point in time, we are awaiting SEBI's approval.
Okay, sir. One last question, sir. I did not come across a specific cost to income number. Do you all disclose that? Do you all share that?
Okay. I think, we probably got it missed out, so let me give you the exact-
No, it is right there. Nine months is 18%.
for nine months it is 18%.
six months, 16%.
The six months is 16%, and the quarter it is, you know, approximately 14.8%. We can take it as 17%-18% as the normalized rate cost.
Sir.
Cost to income. Yeah.
17%-18% you said, sir?
Yeah, 17%-18%.
Thank you and all the very best.
Thank you.
Thank you. We have our next question from the line of Aditya Doshi from Chanakya Capital. Please go ahead. Mr. Aditya Doshi? We are unable to hear you.
Hello.
We are not able to hear you, sir.
Hello. How is it?
It is not clear.
We're not able to hear you, sir.
Is it better now?
Yeah, it's better.
Hello.
Yeah. Congratulations on the good set of numbers. My question was, regarding to fee income. If we see a disbursement on a steady-state last four.
I'm sorry.
We're not able to hear you.
Hello? Hello?
I'll say you have to move to a place with, you know, good network.
Hello. Is it better now?
yes.
Yes, better.
Yeah. Hi. My question was related to fee income. If we see fee income as a percentage to disbursement, last two quarters we have been disbursing around INR 3,500 crores. If we see that as a percentage of disbursements, it has reduced from 3% from Q1 of this year to now 2%. Can you throw some light on why that fee income has reduced for last two quarters?
Actually the fee income related to disbursements is actually deferred, it is accounted in the interest income line itself. It is accounted at a yield level. The fee income that you see there is more like a premium income and, you know, some other charges which are recovered.
Okay. Thank you. All the best.
Thank you. We have our next question from the line of Abhay Modi from Helios Capital. Please go ahead.
Yeah, hi. Good evening. I was going through the draft letter of offer. In there, it's mentioned that the retail loans about 21.7% is under moratorium. I mean, can you tell how much is it as of end of December and when do you think it will end?
Actually, morat and restructuring, I think it's almost, I think for the entire industry it has almost come to an end or maybe it's in the final stages. Today what NPA pool we are seeing, I think most of it is already, you know, taken into account. This NPA, this moratorium started in the year 2020 from March 24th. It was basically for Q1 and Q2 of 2021, 2022, if I'm not wrong. Right.
Mm-hmm.
Of course, we had a slightly higher moratorium rate. Now all those things are budgeted and all those things are taken into account, and now what we see is, you know, the NPA pool is, you know, water had to flow from morat pool or the restructured pool has already flown. What we see now is consolidation of all those things.
No, are the loans under moratorium or is it over? Because it's mentioned it is still under moratorium as of 30th of September 2022.
No, no, it's over. See, because this was in 2021, you know, the first and the second, the second thing got over in October, I think. I think it's April to June and September.
September, yeah.
Basically quarter one and quarter two. That's over, sir.
as of December 2022, there are no loans under moratorium.
Under moratorium, no.
No. September it was 2021, all of these loans have come out of moratorium in the current quarter.
Basically, that moratorium was for, you know, three plus three, six months. After that, there was restructuring resolution under resolution 1 and resolution 2. We may have some accounts under restructured pool, but even in the restructured pool, it is for a period of two years.
We would, we'd have structured it in a different way. For example, certain set of cases would have three months moratorium, certain cases would have a six months moratorium and then the step up EMI or the full EMI. If we are talking about moratorium, I think none of the accounts are today in moratorium. Would we have few cases which are part of restructuring? Yes, the answer is yes.
In all those accounts, the EMI would have started because two years morat is something, you know, which is not given, and whatever you have been given, whether it is three months, six months or nine, that is over, both on, you know, the entire pool, be it retail or corporate.
No, I understand that, and that is exactly why I'm asking this question because this is mentioned in the letter of offer. That is why I'm asking this question, that it says very categorically that 21.7% of our retail loan book as of 30th of September 2022 is under moratorium. That is what I am asking you.
Let's have a look at that, sir, because there's nothing which is now under moratorium.
Okay. Nothing. Okay. There's no loans under moratorium as of now, everything is either restructured-
Yeah.
or is in NPA. Okay.
Right.
Okay. Thank you. Thank you.
Thank you. We have our next question from the line of Sanket Chheda from DAM Capital. Please go ahead.
Yeah, hi, sir. Congrats on the decent set of numbers. My question.
Thank you.
First question was that, credit cost one rate since last couple of quarters, though it has not inched up, but, it's quite high at about 170, 180 basis. While on margin, we mentioned that, currently it's 4.7%, but, steady-state we would like to see at 3.2%, 3.3%.
Maybe that's a conservative guidance and, maybe we would be around 3.7%, 3.8%, but, that's a, that's a big drop. We are making ROA of, say, 150, 160 basis as of now. Unless we, say, compensate, in credit cost somewhere, when it normalizes over 2024, 2025, what are the kind of ROAs that we are seeing? Are we seeing credit cost normalizing, to, say, 50, 70 basis, in FY 2024 or FY 2025?
Okay. If you look at H1 trade cost, it is 0.94%. Nine months is 1.13%. If I remove one-off, it is 0.72%. This year, leaving one-off, the trade cost will be 1%. Right? On the retail side, very clearly, we can see credit cost normalizing at about 0.6%. That I'm very sure about that. On the corporate side, I'm very sure about resolution, but if there is one-off, credit cost, obviously credit cost is going to be slightly more. I think the way I would want to, you know, see credit cost is that with one-off, without one-off.
Definitely, you know, if not coming year, next year, we can see credit cost at, of about 0.6%-0.65%, 100%, that's for sure. Now, on the retail side, coming year, we can say about 0.6%. If you take both retail and corporate together, and if there is one-off, then the credit cost could be, you know, slightly higher than what I mentioned.
Okay. Okay. In, in, this release, you have also incurred some, impairment on asset held for sale, which is like INR 52 crores. What, what's there?
That's.
How?
Actually, we had clarified that, sir. This is a pool, I think small pool of asset which was held is a very, the old book legacy pool. That, you know, that we already clarified. We have marked it down and now that is, yeah.
That, rather we should see as a part of the credit cost only, right?
No, that is not part of credit cost. Anyway, it's one time. This is a legacy pool. If you see, of course, we have charged to P&L, but that is not part of credit cost.
Okay. Okay. Sure. When we talk about disbursements, maybe we will close this year with a slight, lower single digit, growth YOY. On that, even if we grow 20%-25%, the next year growth that we are guiding, we won't be able to do that unless the disbursement growth is much higher. Maybe for at least FY 2024 and then from FY 2025 it can, say, normalize to the number you are guiding. Is that a right, way to look at?
If you look at, quarter three, the disbursement growth is 21%. If you look at nine months YOY, we are at 39%. What we have guided is about 22%-25% of disbursement growth and 17% to around 17% growth on the book. This is very much possible because it's not just the disbursement, even on the, on a book retention fee. We're working on both, and therefore we feel that this is quite possible.
My question was, sir, that which this year you have been doing and 22% is possible on disbursement. I'm not denying that. I'm saying that that has not resulted in this year. If you are guiding for, say, 15% plus even for next year, disbursement growth has to be much higher.
No, this I was talking about 12 months from now, coming year. I told, this year we had guided, you know, book growth of close to 10%.
Okay. lastly, sir, in out of overall risk sector, how much is in stage two or there is some part which will be in stage one or stage three?
Talking about retail, what is in NPA is about close to 15%. What is in stage two is 3.91.
Okay. It is either in stage 2 or stage 3. There is nothing in stage 1 out of this structure. Right?
Yes.
Sir, please go ahead, sir.
Hello?
Yes, sir. Please go ahead.
Hello, sir.
For the restructuring book, we have got a 15% NPA. That number is static. There is no additional incremental we have seen in the last two, three quarters. Whatever the stress we are looking into restructuring book, that is getting settling down.
No, I'm asking that of the restructured book, is there anything on in stage one or the entire restructuring is either in stage two or stage three?
No, no, not the entire in stage one. We have, if this is as per the FOIR logic, which we have already discussed in the, you know, earlier investor call, as per that only we are doing.
I just wanted to know, how much is in stage one, not entirely, that we agree, but how much is in stage one of the restructure if we have that number only?
We can come back to you on that. As I mentioned earlier, you know, because now moratorium and restructured pool is, restructuring is behind us. Whatever we have seen is a result of, both moratorium and restructuring. Whatever NPA pool we are, we see in either retail or corporate is post-moratorium and restructuring, so we can get back to you on specific numbers.
Sure, sir. Sure. Those were the questions from me. Thanks a lot.
Thank you. We have our next question from the line of Pratik Chheda from Guardian Capital Partners. Please go ahead.
Yeah. Thanks for taking my question. In the opening comments, you mentioned that there has been a control on the BT outs and the pre-closures and the foreclosures. What has been the screening strategy here? I mean, what has been the key difference that has, you know, led to these lower BT outs? In terms of if you can also quantify what is the BT out percentage maybe a year back, so same quarter year back, and what is it today?
What I was saying was, I think our overall run-off in a month was close to about INR 1,000 crore, right? That INR 1,000 crore we are able to, you know, control it to less than INR 800 crore. That we were effectively able to manage, which means this is largely coming out of BT out and also foreclosure and part closure. This also includes normal run-off.
Okay. In terms of percentage, if you just have to strip out the BT out and foreclosures, not the normal run-off, how much would that be in a year back?
No, it has come down drastically. Of course, even though, you know, these are early days, but we have seen very good traction in last couple of months, and we hope that this trend will continue. There is scope for another INR 50 odd crores to come down.
Okay. My second question is, when on the margins bit, I would like to know what is our yield rate on the affordable piece. When we say that, we are gonna get incremental business around 35% from the affordable segment, that is, I'm assuming it will be slightly better yield or even much more better yields.
Then on the other hand, we are saying that there is a good 50, 60 bps compression coming in the margins. This is, you know, slightly counterintuitive. What is what is gonna really contribute a majority? Which is the major factor which is gonna contribute to the sort of normalization of margins? Is it the mix change? Is it, aggressive growth plan which we might offer, in terms of t rying to grow maybe a little bit more faster.
See, affordable book would definitely be able to generate a higher yield really compared to prime. In that sense, definitely you are right. All I'm saying is that we have seen some fluctuations in the past, and it may continue for next few quarters. Therefore, if you talk about next three to four quarters, I think minimal state there won't be too much of variance from what we are seeing it now. I'm talking about, you know, long-term steady state. Obviously affordable is going to come at a higher yield compared to prime.
Yes. Okay. I'll come back at you.
Thank you. We have our next question from the line of Nidhesh Jain from Investec. Please go ahead.
Thank you for the opportunity, sir. Firstly, what are the incremental yields on affordable housing and prime home loan segment that we are getting?
Sorry, please repeat the question, sir.
What are the incremental yields on affordable housing segment and the prime home loan segment that we are getting in which we imported in Q3 or we are getting in the month of January on incremental basis?
Basically what yield we are seeing now is largely from, prime and affordable is going to be at least about 125 to 150 basis.
What are the prime yields? If you can share the level of what is, what is the yields in absolute %.
It will be, prime is about 9.11%. Affordability in the range of 9.6%-9.775%.
Sure. Secondly, is this one-off that we are getting, from our assignment income? I understand it is because of MCLR rate changes.
Yeah.
Which led to this one-off. As interest rate stabilizes, then, this one-off will not recur, next year probably. Is that a right understanding?
Yes. Absolutely, you are right, because now we are seeing that interest rate has almost peaked out. Before, you know, this one-off, whether on the negative side or positive side, I think won't probably happen in the next few quarters to come.
It is linked to our base rate, our RPLR or it is a function of our LAP, we changing our interest rate to the customer or it is a function of banks changing their MCLR which drive this one-off?
It is linked to the bank's base rate.
Okay. Okay. Lastly, on the operating expenses, we have seen, we, you have added, almost 80 odd branches, on affordable segment. If you look at employee expense or non-employee expense, they have not grown. In fact, employee expense has declined sequentially. Is there any one-off in the employee expense or what should be the quarterly OpEx that we should build in going forward?
On the affordable piece, I think most of the OpEx is already built in because all this is spent during the financial year, right? In terms of OpEx, no, I think there is no major one-off. Therefore, going forward, you know, we will see only a marginal increase in the OpEx, not significant increase.
Okay. Sure. Thank you, sir. That's it from my side.
Thank you.
We have our next question from the line of Nischint Chawathe from Kotak. Please go ahead.
Hi. Thanks for taking my question. Sorry, I joined late, maybe this was discussed. Still trying to understand a little bit on the arrangement that you have on the assignments by the bank. You know, is the rate fully passed through, you know, whatever change, whatever the changes the bank will make or, is it something that your cost of assignment from the bank will be linked to their MCLR but, you know, what you are charging to the customer is linked to your rate?
In most of our cases, the rate is, it is linked to the MCLR.
I'm sorry. Can you speak louder please?
In most of the cases, it is linked with the MCLR of the respective financial institution. Whenever there's a change in the MCLR of those financial institutions, accordingly it is passed on. If I have changed, let's say the rate by 50 basis points, however, the MCLR changes by 20 basis points, the pass on will be 20 basis points.
You will end up kind of, you know, having a positive or a negative impact to the extent of.
Yes. Yes. That's how this assignment income, it comes in our P&L.
Just again, when I'm looking at the yield on loans, you know, and that has sort of, you know, that has kind of gone up almost around 200 odd basis points over the last two quarters. I'm sorry, around, yeah, more than 200 basis points actually over the last three quarters. Is it something that it is just to do with the fact that you have raised the benchmark rates or is there, you know, kind of, you know, higher increase in the incremental loans or anything like that?
It's a function of both.
Uh-huh.
If you see our yield excluding the securitization in Q3 FY23, it's 10.83. There's an increase of 90 basis points. As MD had mentioned earlier that this is primarily on account of increase in the yield by increasing the rates by the company.
So will be the case between 1Q and 2Q?
Yes.
This is the entire benchmark going up, right? Right. Just one last question. I know we touched upon it, but to understand the entire COVID restructured loans of INR 2,037 crore, these would be in stage two or one, depending on, you know, I think you shared a bit. That's right. Right?
Yes.
Okay. You'll probably share the break-up offline in terms of, you know, how much is in stage one and stage two.
Sure.
Okay, thanks. Thanks. Those were my questions.
Thank you. We have our next question from the line of Akash Sethia from Elara Capital. Please go ahead.
My questions have already been answered by, you know, earlier, so I'm just gonna step back into the queue. Thank you.
Thank you. We have our next question from the line of Sandeep Joshi from Unifi Capital. Please go ahead.
Yeah. Hi. Thank you for the opportunity. My question is to Mr. Girish Kousgi. Hello, sir. The question is actually related to corporate book. Hello, sir. Since you've completed about three months in the organization, you'd have actually spent a good amount of time to go through all lumpy exposures. Can you give a sense on the performance of corporate book, in terms of, do you expect any lumpy slippages in near term, or do you believe all stresses that are already recognized and you do not expect any incremental slippages in the book?
Yeah. Thank you very much. I have seen the debt portfolio at a close detail. I think we are adequately provided. All the accounts, you know, which are in stage one, you know, very closely I've seen, and I don't expect any slippages, you know, in next few quarters from this.
As of now, we don't see any slippages. Right? We're also looking at some resolution. Only thing is the timeline for resolution might take some time. If you look at the entire NPA pool as well, there are, you know, close to 50% of the NPA pool, we see very good traction on the resolution. Therefore, I don't see, you know, any, you know, slippages happening in next few quarters.
Okay. How the stage two book is performing? I mean, are there any sticky, lumpy exposure over there or the book is churning?
Stage 2 is zero. We don't have any case in stage 2.
That is all retail in stage two?
Yeah, exactly. Yeah.
Okay. Okay. The second question is on the income on your assigned loans. I mean, you just answered to the earlier participants that how the maths work. I just want to check. From next quarter onwards, there will be no such income or do you think some part of it is going to be passed on by the other financial institution which that and that effect will come in next quarter?
Basically, it get triggered off, with, you know, change in repo. If there is no change in the repo or if the interest market, condition, if there is no change, I think there won't be any impact.
Whatever repo rate hike have already been happened, and the rate which was increased by the financial institution that has been passed completely till now or some part is pending?
No, it is passed on completely.
Okay. If there is no repo rate hike, there will be zero assignment income in next quarter.
There won't be any fluctuation. That's all. This, the, I think the trigger is change in repo.
Okay. Understood. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments.
Thank you everyone for joining us on the call. If you have any questions unanswered, please feel free to get in touch with investor relations. The transcript of this call as well as the audio will be uploaded on our website, which is www.pnbhousing.com. Thank you very much.
Thank you. On behalf of PNB Housing Finance Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.