There have been a lot of queries on the poor ROEs of PNB HF as compared to peers.
I think with consistent growth, there should be reduction in cost to income ratio which at around 28% is highest for PNBHF amongst all HFCs. For other HFCs it is in the range of 14 to 17% and for HDFC it is around 11-12% and for DHFL it is around 26%. So with new offices generating higher businesses and loans per employee going up there could be sufficient space for improving cost to income ratio. This should help in improving margins and ROAs.
ROEs in case of financial companies is ROA multiplied by leverage. As compared to gruh and other comparable peers, leverage at 9% is lower. For other companies it ranges in vicinity of 12-13%.
So for ROEs to go up there are enough levers which PNBHF can utilise. Usually once a company grows for a few years with reasonably good asset quality, all other parameters tend to fall in place. I recall similar concerns which were prevalent in case of canfin back in 2014 or thereabouts.
Lets see how this plays out.