PNB Housing Finance had a net interest margin (NIM) of around three percent and it will remain around the same level going forward, said MD Sanjaya Gupta.
Speaking to CNBC-TV18 Gupta said the company has always targeted spreads in the range of 200-208 basis points, and that will also remain unchanged going forward.
He said demonetisation affected the company negatively. He, however, expects the effects will subside from the month of February and things will crawl back to normalcy.
He added loan against portfolio (LAP) remained 18 percent of the entire portfolio. However, gross non-performing asset (NPAs) on LAP were lower than its housing portfolio.
The company reported its quarterly results for the quarter ending December 2016.
Below is the verbatim transcript of Sanjaya Gupta's interview to Reema Tendulkar and Nigel D'Souza on CNBC-TV18.
Nigel: Can you size up the impact of demonetisation on your Q3 numbers?
A: The demands were lower than the previous quarter by about 13-14 percent but the portfolio qualities stood firmly and that was a bigger concern for all of us that will the quality of the portfolio delinquency levels or non-performing assets (NPA) level will surge but they have settled down very well from January onwards and I think in the month of February we should be at the levels of pre-demonetisation period.
Reema: There is hardly any credit demand for capex infrastructure or from large corporate houses, so clearly all the big banks are turning to retail. Is that space seeing intense competition and therefore can it squeeze your margins?
A: Yes, certainly. The credit growth in the first six months has been slower than anticipated and hence all the large lenders have honed their skills on to the retail segment. There is a price war under cutting on the rates of interest and the fee element of loans but not to worry, a specialised housing finance companies certainly hold a stronger footing when it comes to acquiring customers and delivering a far superior quality of service. So I don’t think that only costing or pricing is going to make a differentiator in this competitive age of specialised housing finance company.
Nigel: How will your Q3 margins pan out in Q4?
A: The way we look at it is – two elements. Most of you only report net interest margins which for us were also positive of about 3 percent and we will continue to protect that. The other important and a more significant element is the spread, which is the pure interplay or the margin between cost of funds and the yields that we are getting on our portfolio. That we always target to be in the vicinity of 200-208 basis points. That is also protected. So I think it is a business demonstration which determines the spreads in the net interest margins (NIMs).
Reema: Now that housing has got infrastructure status, how has life changed for you, has money gotten cheaper?
A: What has happened is that the affordable housing will get notified as an infrastructure sector. The credit flow into infrastructure is far easier than otherwise. Lending institutions like us have been getting debt from the capital markets pretty easily. I think with the infrastructure status for affordable housing, the smaller players or the smaller housing finance companies will certainly have ease of raising debt at reasonable cost for a long period of time and that is where it will impact positively. I think that will also help these housing finance companies, which are far smaller to bring down their lending rates in the future.
For full interview, watch video...