Yes Bank’s Profit Rises 31%, Asset Quality Remains Stable
The private sector lender’s loan book rose 38.7% year-on-year.
Yes Bank Ltd. registered a 30.6 percent jump in net profit in the October-December quarter, beating analysts’ estimates.
Net profit increased to Rs 883 crore from Rs 675.7 crore in the same quarter last year, the private lender said in its filing to the Bombay Stock Exchange. The consensus profit estimate of analysts polled by Bloomberg stood at Rs 822 crore.
Net interest income jumped 30.3 percent to Rs 1,508 crore, surpassing the consensus estimate of Rs 1,496 crore, driven by continued above-industry average growth in the loan book.
Net interest margins expanded to 3.5 percent from 3.4 percent in the July to September quarter.
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Loan Book Dynamics
Advances stood at Rs 1,17,087 crore, a growth of 38.7 percent year-on-year, and 6.2 percent quarter on quarter.
Deposits grew 30.5 percent compared to the corresponding quarter last year, registering the fastest growth in at least six quarters. The performance was driven by a 63.3 percent jump in low cost current and savings account deposits.
On a sequential basis, total deposits rose 3.4 percent while CASA deposits rose 13.8 percent to Rs 44,126 crore post the government’s demonetisation decision.
The share of corporate banking in total advances rose by 100 basis points during the quarter to 68.9 percent, while the share of retail and business banking fell.
Asset Quality Stable, Provisions Drop
Asset quality remained largely stable during the quarter with the gross non-performing assets (GNPA) increasing 9.7 percent to Rs 1,005.85 crore on a quarter on quarter basis. The GNPA ratio rose to 0.85 percent from 0.83 percent over the quarter, while net non-performing asset ratio remained flat at 0.29 percent.
Provisions stood at Rs 115.38 crore, a 28.6 percent drop compared to the October quarter, and a 22 percent decline compared to the corresponding quarter last year.
Management Commentary
The improvement in profitability is largely on account of the spike in CASA deposits after the demonetisation process, Yes Bank’s Chief Executive Officer Rana Kapoor said at a press conference today.
The share of CASA deposits in total deposits grew by 3 percentage points during the quarter to 33.3 percent. Around 2 percentage points of this increase can be attributed to demonetisation, he said.
Kapoor expects a large amount of these deposits to remain within the bank, and as a result believes that the bank will attain its target of a 40 percent CASA ratio much before its March 2020 deadline. When it achieves this target, the bank’s net interest margin is expected to climb higher to around 4 percent.
“We will steadily unleash the stored value in our savings account balances,” said Kapoor. By this, he means that the bank will take a call “at the right time” to reduce the interest rate on savings bank deposits below the current 6 percent. This, he said, would lead to significant margin accretion. In the near term, however, Kapoor said the bank will continue to remain competitive on savings account rates.
On credit cost, Kapoor believes that Yes Bank could beat even the revised target for the year. After the September quarter, he had indicated that the bank’s credit cost for the full year would remain within 50-60 basis points, which was lower than the previous target of 50-70 basis points.
In the nine months ended December 31, the bank’s credit cost stood at 34 basis points.
Other Asset Quality Highlights
- Credit costs fell to 8 basis points from 11 basis points in the previous quarter.
- No sale to any asset reconstruction company.
- No additional restructuring during the quarter.
- No 5:25 refinancing during the quarter
- Standard restructured advances as a proportion of gross advances came down to 0.42 percent (Rs 500.2 crore) as at December 31, 2016 from 0.46 percent (Rs 511.5 crores) as at September 0, 2016.
The restructured loans have been performing in line with expectations and the bank does not anticipate any material slippages in this book.Yes Bank’s Earnings Press Release
However, the bank has restructured one account under the strategic debt restructuring scheme in this quarter, taking its loans outstanding under SDR to Rs 193.5 crore as compared to Rs 34.3 crore in the September ended quarter.
Analysts’ Take
Better than expectations; stable asset quality and strong growth.Emkay Global’s First Cut Earnings Note
Earnings in-line; asset quality remains stable.Religare’s First Cut Earnings Note
The Yes Bank stock traded in a narrow band, before closing largely unchanged at Rs 1,347.