Yes Bank Ltd.'s second-quarter profit rose as other income increased and provisions fell. But, it still missed analysts' estimates.
The lender's standalone net profit rose 48% year-on-year to Rs 225 crore for the quarter ended September, according to an exchange filing. Analysts polled by Bloomberg had estimated a net profit of Rs 395.45 crore.
The bank's net interest income, or core income, fell 3% year-on-year to Rs 1,925 crore.
Niranjan Banodkar, chief financial officer of Yes Bank, attributed repricing of deposits along with a stable CASA ratio to the decline in net interest income.
"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 TDs..." Banodkar said in a post-earnings call. "...we don't believe that the mix of deposits should further deteriorate hereon."
The credit-deposit ratio stood at 89%, as of Sept. 30, as compared with 96.1% in the previous year. "The bank ended up carrying more liquidity in the balance sheet," he said.
The lender's net interest margin for the September quarter stood at 2.3%, down 20 basis points on a sequential basis. Prashant Kumar, CEO of Yes Bank highlighted that this is due to the "impact of repricing on the existing liability book" and compression in margin have bottomed out. The trajectory hereon will be towards expansion, he added.
Net interest margin, depending on the overall economic cycle and further rate actions in the financial year, are expected to increase 20 bps by the end of FY24, Kumar said.
Kumar also highlighted a shortfall in priority sector lending target during the quarter of about Rs 33,000 crore, or 9% that went to Rural Infrastructure Development Fund. This shortfall also led to a compression of 35-40 basis points in the bank's NIM.
To resolve this, the bank has purchased the Priority Sector Lending Certificates for small and marginal farmers in the first half of the fiscal, which has increased the cost by Rs 50 crore. In addition, the bank aims to step up the organic lending channels through branches or institutional lending.
"We want to ensure that on an incremental basis, we no longer have the requirement for RIDF for subsequent years... We should start seeing a rundown in that book from FY24 onwards as we begin complying with PSL," Banodkar said.
Its other or non-interest income also rose 38% year-on-year to Rs 1,209 crore.
Concerns On Asset Quality
As of Sept. 30, Yes Bank's asset quality remained stable, with gross non-performing asset ratio at 2%, flat from the previous quarter. Net NPA ratio was also flat at 0.95% from 1% on a sequential basis. By the end of the ongoing financial year, the management expects gross NPA ratio to remain unchanged and net NPA ratio to fall to 0.75%.
In terms of the unsecured loan portfolio, Kumar highlighted "a slight deterioration" in the segment 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," Kumar said.
The NPAs in credit card accounts stood at 2.1% during the September quarter.
During the reporting quarter, provisions fell 14% year-on-year to Rs 500 crore.
The provision coverage ratio stood at 56.4%, as of Sept. 30, as compared with 48.4% at the end of previous quarter.
The bank's gross slippages rose year-on-year to Rs 1,190 crore in the September quarter, from Rs 896 crore a year prior, arising more from personal loans, business loans and credit card segment. It was at Rs 1,430 crore in the previous quarter. Two-thirds of the slippages are coming from the retail portfolio, while corporate portfolio slippages are maintained, Kumar said.
On recovery from the asset restructuring companies, Kumar clarified that the security receipts worth Rs 578 crore were redeemed in the September quarter. "Momentum has been quite strong... This is in addition to the normal course of recoveries and upgrades aggregating to Rs 600-700 crore," he said.
The Metrics Of Advances And Deposits
Yes Bank's net advances grew 8.7% year-on-year to Rs 2.09 lakh crore, as of Sept. 30. The rise in net advances was, however, lower than the industrywide credit growth of nearly 20%. After adjusting for asset restructuring, advances rose 11.2% year-on-year.
Kumar targets for 50% share of the retail loan portfolio, which would be a "comfortable mix" for Yes Bank.
The bank's total deposits increased 17.2% year-on-year to Rs 2.34 lakh crore. Sequentially, it was up 6.8%.
Yes Bank's CASA ratio—the share of low-cost current account and savings account deposits to overall deposits—was stable at 29.4% year-on-year as of Sept. 30.
With capital adequacy ratio at 13.1%, Yes Bank does not plan to raise capital in the coming quarters owing to warrant conversion in the first quarter of FY25.
The banks aims to open 150 branches across the country by the end of FY24, with 20 branches already in operation. Yes Bank has a target of 15% growth in advances, and 20% growth in deposits to maintain the credit-deposit ratio at 89-90%, Kumar said.
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