PNB Housing Finance Navigates Q2 FY26 with Robust Retail Growth and Strategic Focus

PNB Housing Finance Limited has reported a resilient performance for the second quarter and first half of the financial year 2025-26, demonstrating strong growth in its retail loan book and a notable improvement in asset quality. Despite a dynamic market environment, the company's strategic focus on high-yielding segments and operational efficiencies has yielded positive results, reinforcing its position in the Indian housing finance sector.

The company's retail loan book expanded by an impressive 17% year-on-year, reaching INR 79,439 crore as of September 30, 2025. This segment now constitutes a dominant 99.6% of the total loan book, underscoring the company's successful pivot towards retail-centric growth. A key highlight of the quarter was the exceptional performance of the Affordable and Emerging Markets segments, which together grew by 34% year-on-year and now account for 38% of the retail loan book. This growth reflects PNB Housing Finance's commitment to financial inclusion and its ability to penetrate high-potential geographies and demographics across India.

Disbursements in the Affordable and Emerging Markets segments surged by 31% and 23% year-on-year, respectively, collectively contributing approximately 50% of the total retail disbursements. While the Prime segment saw a more modest 2% year-on-year growth, it maintained steady margins in a rate-sensitive market. Overall retail disbursements grew 12% year-on-year to INR 5,995 crore during the quarter. The management emphasized its continued prioritization of growth in the Affordable and Emerging Markets segments, recognizing their potential for higher yields and diversified portfolio growth.

Asset Quality and Profitability on an Upward Trend

PNB Housing Finance demonstrated significant improvements in asset quality, with the Gross Non-Performing Asset (GNPA) ratio declining to 1.04% as of September 30, 2025, compared to 1.06% in Q1 FY26 and 1.24% in Q2 FY25. This positive trend was supported by robust recovery efforts, including the recovery of INR 59 crore from the written-off pool in Q2 FY26. In the retail portfolio, the company successfully auctioned 178 repossessed properties during the quarter, bringing the total disposals for the first half of FY26 to 276. The management highlighted a robust collections framework backed by legal support and omnichannel communications to enhance recovery efficiency.

Profitability metrics also showed strength, with the Return on Asset (ROA) improving to 2.73% for Q2 FY26 (annualized) and 2.65% for H1 FY26 (annualized). The Net Profit after Tax (PAT) grew by 24% year-on-year to INR 582 crore. The company's cost of borrowing declined by 7 basis points sequentially to 7.69% in Q2 FY26, driven by ongoing negotiations with banks and the impact of repo rate cuts. This efficient liability management contributed to maintaining healthy spreads, which marginally improved to 2.26% in Q2 FY26 from 2.23% in Q1 FY26. However, the Net Interest Margin (NIM) saw a slight contraction to 3.67% from 3.74% in the previous quarter, primarily due to lower investment yield.

Strategic Expansion and Digital Transformation

Looking ahead, PNB Housing Finance is committed to expanding its footprint and leveraging technology for sustained growth. The company plans to add approximately 40 to 50 branches annually, with a target of having 250 branches dedicated to Affordable housing by the end of the current fiscal year. This expansion strategy includes strengthening its presence in newly added markets such as Punjab, Chandigarh, and the Northeast. The company's Pan-India presence, spanning 356 branches across various zones, provides a strong foothold in tier 2 and tier 3 cities, where demand for housing finance is growing.

Digital transformation remains a core strategic pillar. The company has completed IT transformation for major platforms and capabilities, including digital onboarding, loan origination, loan servicing, collection management, customer relationship management, and analytics. Further enhancements are underway in financial accounting and HR management systems, aiming to bring greater operational efficiencies and productivity. The management also indicated a cautious re-entry into the corporate segment, with revamped credit policies and expected disbursements in Q3 and Q4, focusing on a thoughtful and gradual approach.

Outlook: Sustained Growth with Prudent Risk Management

PNB Housing Finance's Q2 FY26 performance underscores its strategic clarity and disciplined execution. The company is focused on exploring retail growth, expanding its Affordable housing footprint, enhancing customer experience, and reinforcing risk frameworks. Management guidance indicates an expected growth rate of 17-18% for the year, with NIM projected to remain range-bound between 3.6-3.7%. The company aims to maintain its Gross NPA around 1% and expects the existing asset pool for recovery to continue contributing to a negative credit cost trajectory for the next 2-3 quarters. With a strong leadership team and a resilient culture, PNB Housing Finance appears well-positioned for sustainable growth and value creation for its stakeholders.