CARE places PNB HFC rating on watch, flags rising share of corporate loans

The action is triggered by the increasing share of the corporate loan book in PNBHFL's total loan portfolio and the consequent vulnerability arising out of weakness in real estate sector

CARE Ratings has placed PNB Housing Finance Ltd's ( PNBHFL) ratings on watch with developing implications due to requirement to raise money to maintain comfortable capital adequacy and gearing level. 

The action is triggered by increasing share of corporate loan book in PNBHFL's total loan portfolio and the consequent vulnerability arising out of weakness in real estate sector.

CARE in a early morning statement said the impact of the stake sale announced by Punjab National Bank (PNB; promoter of PNBHFL) in PNBHFL is also to be seen. 

PNBHFL debentures and bonds carry "AAA" ratings. 

CARE will continue to monitor developments with regard to the above and would take up review of rating when more clarity emerges on the above aspects, it added.

The ratings of PNBHFL continues to derive strength from its experienced management team, brand linkages with PNB, consistent growth in loan portfolio, profitability profile of the company. 

The company has well diversified resource profile, comfortable asset quality numbers, maintenance of adequate capitalization levels and adequate liquidity position.

The ability of the company to maintain its asset quality, profitability, capital adequacy and liquidity position remain key rating sensitivities.

CARE said the retail housing finance segment continues to be resilient and healthy. But vulnerability of whole sale loan book of the HFCs including PNBHFL has increased given weakness in real estate sector and credit profile of real estate developers. 

Although, NPA for the wholesale loan book is Nil in December 31, 2018, overall, its vulnerability is expected to remain relatively high and could impact asset quality profile to some extent over next 1-3 years. The wholesale loan book forms nearly 22% share of Assets Under Management ( AUM).

Also, vulnerability of retail loan against property (LAP and NRPL; 16% and 4% of AUM as on Dec-18) portfolio of HFCs including PNBHFL is expected to be higher than retail housing finance business. 

The sustainability of the asset quality performance in these segments will be critical for the credit profile of the company going ahead. 

The sustainability of the asset quality performance in these segments will be critical for the credit profile of the company going ahead.