Yes Bank reported a 47.4% year-on-year rise in net profit to Rs 225.21 crore in the quarter ended September 2023 but net interest income fell 3.3% on account of repricing of deposits.

The private lender’s other income increased while provisions fell. This accounted for the rise in net profit. The bank’s non-interest income rose 38.4% year-on-year to Rs 1,210 crore.

Net Interest Margin

The bank’s lending margin dropped by nearly 30 basis points year-on-year and 20 basis points on a sequential basis to be at 2.3% in the September quarter due to repricing in term deposits. Yes Bank CEO Prashant Kumar said the compression in net interest margin (NIM) was due to the “impact of repricing on the existing liability book” but this has bottomed out. 

There will be a trend towards expansion of NIM and, depending on the overall economic cycle and further rate actions, the bank expects it to rise 20 basis points by end of FY24.

“What we believe to be the end of the margin compression and going forward margin expansion is expected. We expect our NIMs will expand by 20 bps by end of this fiscal,” Kumar said.

Net Interest Income

Yes Bank’s net interest income, or core income, declined to Rs 1,925 crore in the fiscal second quarter ended 30 September.

"If you look at NIM, loan spreads have compressed because term deposit repricing had to be absorbed. We have entirely absorbed the backed-book repricing of our term deposits," Yes Bank chief financial officer Niranjan Banodkar said in a post-earnings call. "We don't believe that the mix of deposits should further deteriorate hereon."

Asset Quality

The bank’s asset quality remained stable, with gross non-performing asset (NPA) ratio standing at 2%, same as the previous quarter but lower than 12.9% a year ago. 

Net NPA ratio was also flat at 0.95% from 1% in the preceding quarter. In the year-ago period, it was at 3.6%.

The management expects the gross NPA ratio to remain along similar lines and net NPA ratio to fall to 0.75% by the end of the fiscal.

The unsecured loan portfolio saw a slight deterioration where the repayment remains outstanding beyond 30 days since due date. 

"Size of delinquencies are on the increasing trend on unsecured loans. Overall, there are concerns, but not in a significant way. It is a function of how strong are the collections and efforts put into collections," said Yes Bank managing director and CEO Prashant Kumar.

Slippages

The bank's gross slippages rose year-on-year to Rs 1,190 crore in the September quarter, from Rs 896 crore a year ago. This was more from personal loans, business loans and credit card segment. 

In the preceding quarter ended June 2023, slippages was at Rs 1,430 crore.

Kumar said two-thirds of the slippages are coming from the retail portfolio.

As part of the recovery from asset restructuring companies, the bank redeemed security receipts worth Rs 578 crore in the September quarter. "This is in addition to the normal course of recoveries and upgrades aggregating to Rs 600-700 crore," Kumar said.

The non-performing assets (NPAs) from credit card accounts stood at 2.1% during the September quarter.

Provisions

Provisions and contingencies in the September quarter fell 14.1% year-on-year to Rs 500.38 crore. In the year-ago period, it stood at Rs 582.81 crore.

Provision Coverage Ratio (PCR) stood at 56.4% versus 48.4% at the end of previous quarter. Including technical write-off, PCR stood at 72.1% as against 67.8%.

Loan Growth

The private sector lender’s loan book grew 11.2% year-on-year, with retail advances crossing Rs 1 lakh crore mark. SME advances grew 25% year-on-year to cross Rs 30,000 crore during the quarter.

Deposit Growth

The bank’s total deposits grew 17.2% year-on-year to Rs 2.34 lakh crore. On a sequential basis, it was up 6.8%.

The CASA (current account savings account) ratio was stable at 29.4% as of 30 September 2023. During the quarter, the bank opened 3.91 lakh CASA accounts.

The bank is targeting a growth of 15% in advances and 20% in deposits to maintain a credit-deposit ratio of 89-90%, Kumar said.

The aim is to open 150 branches across the country by the end of FY24.