PNB Housing Finance looking to conserve capital

As part of balance sheet management, PNB Housing has decided to securitise its LAP portfolio instead of securitising retail housing loans.

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Around 8% of the corporate loan book turned non-performing at the end of June compared with 1.29% in case of retail loans.
Kolkata: Mortgage lender PNB Housing Finance said it is looking to conserve capital even as it awaits the promoter Punjab National Bank's decision on subscribing to its proposed rights issue.

As part of balance sheet management, PNB Housing has decided to securitise its loan against property (LAP) portfolio instead of securitising retail housing loans.

It has already begun selling down corporate loans to cleanse the balance sheet. Around 8% of the corporate loan book turned non-performing at the end of June compared with 1.29% in case of retail loans.


Securitisation is a way of selling down existing loans to another lender to free capital. Lap carries a higher 100% risk weight compared to up to 75% risk weight in case of housing loans and thereby securitising LAP would free higher quantum of capital.

PNB Housing Finance chief executive Neeraj Vyas told ET that the new strategy would help achieve higher business with the same quantum of capital,

It has not securitised any of its loans in the first quarter. Its capital to risk asset ratio (CRAR) stood at 18.05% at the end of June compared with 15.13% a year back.
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The regulator has mandated housing finance companies to raise CRAR to 14% by March 2021 and to 15% by March 2015.

"The modalities of our equity raising plan will depend on PNB's decision on whether it would invest in PNB Housing Finance or not. If yes, then rights issue of shares will be the best possible option for us. Others existing shareholders are already on-board," Vyas told ET Thursday.

It set a target of raising Rs 1700 crore through share sale.

The lender reported about 10% fall in net profit at Rs 257 crore in the June quarter against Rs 285 crore in the year ago period. It had made Rs 242 crore net loss in the March quarter.
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Net interest margin for Q1 shrunk to 2.66% compared to 3.14% in the year ago period. "We are very happy to have made profit after a loss in the fourth quarter.

"The load of provision was not there this time as we had taken the pain the in the fourth quarter," Vyas said. He said that business is likely to pick up September-October onward and expected to reach the peak of capacity only in January.
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The lender is aiming to disburse about Rs 13000 crore this fiscal, against Rs 18500 crore in the previous fiscal. Its loan assets shrunk 10.4% year-on-year to Rs 68,009 crore at the end of June, fell from Rs 75,933 crore a year back. About 2.76% of the loans have turned non-performing.

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