Private sector lender Yes Bank reported a 45% drop in net profit year-on-year for the January-March quarter on the back of accelerated provisions for bad loans.

Net profit fell to Rs 202 crore for the fiscal fourth quarter ended March 2023 from Rs 367 crore in the same period a year earlier.

The provisions for the bank increased 127% over the year-ago period to Rs 271 crore. For the whole year, the bank’s provisions were up 50% to Rs 2,220 crore.  

The net profit for the full-fiscal also fell 32.7% to Rs 717 crore due to step up in the provision coverage ratio for bad loans. In FY22, the private lender had posted net profit of Rs 1,066 crore.

Yes Bank, however, said that it has managed to report full-fiscal profitability for the second straight year despite rise in provisioning.

"The higher provisioning is mainly on our loans and security receipts (SRs),” Yes Bank managing director and CEO Prashant Kumar told reporters in a post-earnings call.

With the share of SRs as a portion of non-performing assets (NPAs) having come down to 2.4% from 4.8% last year, provisioning requirements are expected to trend lower. The outstanding SRs on the bank's book are Rs 4,430 crore, down from over Rs 6,000 crore a year ago.

The bank’s net interest income (NII) rose 15.70% to Rs 2,105 crore during the March quarter on the back of robust growth in its advances. 

In FY23, Yes Bank's NII stood at Rs 7,918 crore, up 21.80% from its FY22 net interest income.

The standalone interest earned during the period stood at Rs 6,216 crore, up 25% YoY from Rs 4,947 crore in Q4FY22. 

For the year ended 31 March 2023, the interest income stood at Rs 22,697 crore compared to Rs 19,023 crore a year ago.

Total income for the quarter under review stood at Rs 7,298 crore, up 25% YoY from Rs 5,829 crore. In FY23, Yes Bank posted a total income of Rs 26,624 crore versus Rs 22,285 crore a year ago.

The interest expended during the January-March 2023 quarter stood at Rs 4,110 crore, up 31% YoY and 5.4% sequentially.

Net interest margin during the fiscal fourth quarter was 2.8%, improving from the year-ago figure of 2.5%.   The bank said that there was a strong momentum in new business generation with gross disbursements at Rs 1 lakh crore for FY23. During the quarter under review, the bank had a gross disbursement of Rs 26,317 crore.

In FY23, Yes Bank's total assets stood at Rs 3,54,786 crore, around 11.49% higher from its total assed of Rs 3,18,220.23 crore in FY22.

Total deposits were at Rs 2,17,502 crore. The bank has total security receipts of Rs 4,430 crore on its book.

Total advances were at Rs 2,03,269 crore, with retail loans comprising 45% of the total loan book, SMEs (small and medium enterprises) at 14% and corporate at 27%. 

Yes Bank’s revenue from retail banking segment was at Rs 3,218 crore in Q4FY23, up from Rs 2,226. crore in Q4FY22. In Q3FY23, the revenue from retail stood at Rs 2,880 crore. The corporate banking revenue stood at Rs 2,504 crore, up from Rs 2,656 crore in Q3FY23 and Rs 2,294 crore in Q4 of FY2022.

The bank’s gross non-performing assets (NPAs) stood at 2.17% of total assets in the March 2023 quarter versus 13.93% in the year-ago period and 2.02% in the preceding quarter.

Net NPA at 0.83% was down sequentially (1.03%) and on the YoY basis (4.53%), the company said in its filing to the exchanges.

“The bank has undertaken a significant step-up in provision coverage ratio to 62.3% as against 49.4% in the year-ago period. The robust recoveries and upgrades continue to outpace the gross slippages,” Kumar said.

“We have been able to achieve a strong resolution momentum with recoveries and resolutions at Rs 6,120 crore, higher than the target of Rs 5,000 crore,” Kumar added. 

The reporting quarter has gross slippages of Rs 1,196 crore, lower by 25.7% than the previous quarter. The bank’s gross slippages for the year was at Rs 4,775 crore for FY23, which was lower by 17.6% over the previous year. 

The bank is not likely to see any major aging-related provisioning till FY26. “We will have to make aging provisions of 80 basis points in FY24 and 100 bps in FY25 beyond the general provisions for fresh slippages, Kumar said. 

Yes Bank will also not need to make any additional provisions for the ongoing legal dispute over writing down of the bank’s AT1 bonds in March 2020, Kumar added.