- PNB Housing delivered an 8% YoY PAT increase to INR 5.2 bn, but missed consensus by 5%.
- Net interest income rose 11% YoY, keeping the bank’s core earnings on a solid trajectory.
- Operating expenses jumped 17% YoY, driven by higher staff costs and a one‑time gratuity provision.
- Credit cost dynamics turned positive with a provision write‑back, pushing net credit cost to –20 bps.
- Motilal Oswal reiterates BUY with a target of INR 1,200, implying a 1.4× Dec‑27 BVPS multiple.
- Projected CAGR of 18% in loan book and 14% in PAT through FY28, with RoA/RoE expected to reach 2.4%/13%.
Most investors skim past the headline PAT miss—yet they ignore the credit‑cost reversal that could redefine PNB Housing’s upside.
Why PNB Housing’s PAT Growth Beats Expectations Yet Misses Estimates
PNB Housing reported a net profit after tax (PAT) of roughly INR 5.2 bn for Q3 FY26, up 8% year‑over‑year. While the figure fell short of the consensus by about 5%, the growth narrative is more nuanced. The earnings lift stemmed primarily from an 11% YoY surge in net interest income (NII), which reflects higher loan disbursements and a modest spread improvement. However, operating expenses (OPEX) climbed 17% YoY to INR 2.4 bn, eroding part of the top‑line gain. A notable driver of the OPEX spike was a one‑time gratuity provision of INR 60 m mandated by India’s new labor code, an expense that will not recur. The bottom line—PPOP (pre‑provision operating profit) rose 8% YoY to INR 6.3 bn but still missed estimates by 5%, echoing the PAT shortfall. The key takeaway is that the earnings miss is more a function of timing and a temporary cost headwind than a fundamental deterioration in the business.
How the Loan Boom Aligns with Real‑Estate Credit Trends
PNB Housing’s loan book is expanding at an 18% CAGR projected through FY28, mirroring a broader resurgence in Indian housing finance. Low‑interest rates, increased urban migration, and a surge in affordable‑housing projects are fueling demand for mortgage‑linked credit. The bank’s loan‑to‑value (LTV) discipline remains tight, keeping asset‑quality metrics healthy. Moreover, the credit cost profile turned favorable this quarter. A provision write‑back of INR 405 m (reflecting recovered loans) pushed net credit cost to –20 basis points, a marked improvement from the prior quarter’s –57 bps. This rare negative credit cost signals that the portfolio’s risk is receding, a positive catalyst for future profitability.
Competitor Landscape: Tata Capital, Adani Housing Finance and the Credit Race
PNB Housing does not operate in a vacuum. Tata Capital and Adani Housing Finance have been aggressively expanding their loan books, leveraging scale and digital origination platforms. Tata Capital reported a 15% YoY loan growth in the same quarter, while Adani posted a 12% increase. What sets PNB Housing apart is its niche focus on mid‑tier housing projects and a disciplined cost structure. While Tata’s broader consumer finance exposure adds diversification, it also introduces higher non‑interest income volatility. Adani’s rapid growth is capital‑intensive, leading to a higher OPEX ratio. PNB Housing’s OPEX‑to‑income ratio remains competitive, especially after adjusting for the one‑off gratuity expense.
Historical Parallel: 2018‑19 Housing Finance Surge and Market Reaction
During FY19, the Indian housing finance sector experienced a similar credit‑cost compression as banks cleared legacy stressed assets. Companies that combined loan‑book acceleration with cost‑discipline, such as LIC Housing Finance, outperformed peers and rewarded shareholders with double‑digit total returns. The lesson is clear: when credit costs move from negative to neutral or positive, and loan growth stays robust, the earnings runway expands dramatically. PNB Housing appears to be replicating that favorable environment, positioning itself for a potential multi‑year earnings upswing.
Technical Definitions: PPOP, RoA, RoE Explained
PPOP (Pre‑Provision Operating Profit) measures earnings before credit‑loss provisions, giving investors a clearer view of core operating performance. RoA (Return on Assets) indicates how efficiently a firm turns its asset base into profit; a projected 2.4% RoA suggests modest but improving efficiency. RoE (Return on Equity) gauges profitability relative to shareholders’ equity; the forecasted 13% RoE points to a healthy earnings‑to‑capital ratio, especially in a capital‑intensive sector.
Investor Playbook: Bull vs. Bear Cases for PNB Housing
Bull Case: Continued loan‑book expansion at 18% CAGR, further credit‑cost normalization, and margin accretion drive PAT to surpass INR 7 bn by FY28. The stock, trading at 1.1× FY27E P/BV, offers a valuation upside to the target of INR 1,200 (≈1.4× Dec‑27 BVPS). A favourable policy environment for affordable housing amplifies growth prospects.
Bear Case: If operating expenses rise faster than revenue—especially due to persistent staffing costs or additional regulatory provisions—margin pressure could erode profitability. A slowdown in real‑estate demand or a spike in non‑performing assets would also weigh on credit costs, pulling the price below the current 1.1× P/BV level.
Investors should monitor OPEX trends, credit‑cost trajectories, and macro‑level housing demand indicators. A disciplined entry around the current price with a clear stop‑loss could capture upside while protecting against downside volatility.