A customer exits a Yes Bank Ltd. branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Q3 Results: Yes Bank’s Profit Misses Estimates Even As Provisions Fall

Yes Bank Ltd.’s profit missed analyst estimates for the second straight quarter even as its provisions declined.

Net profit fell 7 percent year-on-year to Rs 1,001 crore in the quarter ended December, according to the private lender’s exchange filing. That’s lower than the Rs 1,086 crore consensus estimate of analysts tracked by Bloomberg.

The decline came despite a surge in net interest income and lower provisions. The bank’s core income rose 41 percent year-on-year to Rs 2,667 crore. Analysts had estimated Rs 2,519 crore. Growth was backed by a 42.2 percent increase in advances. Net interest margin for the quarter was stable at 3.3 percent. Its provisions fell 41 percent to Rs 550 crore.

What hurt the bank was a fall in non-interest income, which fell 37.4 percent year-on-year and 39.5 percent sequentially.

This was “predominantly on account of treasury loss and lower corporate fees due to rebalanced sequential growth in corporate advances, the bank said in its press release. It added that provision for mark to market loss on treasuries was offset through a write-back of provisions made last quarter.

Asset Quality Deteriorates

Gross non-performing assets rose to 2.1 percent of the total advances from 1.6 percent in the previous quarter. Net NPA ratio expanded to 1.18 percent from 0.84 percent.

The bank said it had classified one large account worth Rs 1,913 crore as a non-performing asset with 25 percent provisioning in the December quarter.

“There could be further risk to earnings if new management decides to address the divergence between its reported stressed assets and those assessed by the regulator, which may require an increase in provisions,” Bloomberg Intelligence said in a report prior to the third quarter earnings.

The bank is yet to receive the final divergence report for FY18 from the Reserve Bank of India.

Other Highlights

  • CET-I improved to 9.1 percent from 9.0 percent in the preceding quarter.
  • Overall capital adequacy at 17.4 percent with Tier I Ratio at 12.0 percent.
  • Bank will amortise Rs 66.4 crore mark-to-market loss by March.
  • Q3 credit costs stood at 29 basis points.
  • Provision coverage ratio was 44.2 percent.
  • Retail loans added 65 percent of the incremental loans during the quarter.
  • CASA growth impacted due to an increase in currency in circulation.

Names New CEO

The Mumbai-based lender named Deutsche Bank’s Ravneet Gill as its new managing director and chief executive officer.

Gill will replace Rana Kapoor, co-founder and CEO, who is due to step down by the month-end after the Reserve Bank of India denied him another term. Earlier this month, Yes Bank’s board said that it had finalised a list of candidates for Kapoor’s successor, without naming people.

While Yes Bank has seen a rapid growth over the last decade under Kapoor, his leadership came into question after the regulator pointed out discrepancies in the way the lender reported its bad loan numbers.

Shares of Yes Bank advanced 19 percent after the announcement of new CEO compared with the benchmark Nifty 50’s 0.2 percent gain. The stock had tumbled 46.74 percent in the last 12 months compared with a 0.75 percent decline in the NSE Nifty Bank Index.

Q3 Results: Yes Bank’s Profit Misses Estimates Even As Provisions Fall