Private sector lender YES Bank reported a 25 per cent increase in net profit in the October-December 2015 quarter to Rs 675.7 crore from Rs 540 crore in the year-ago quarter, on the back of robust growth in net interest income (NII) and higher other income.
NII, difference between interest earned and interest expended, grew 27.3 per cent to Rs 1,157 crore. Other income - treasury gains, income from fees, commission etc — expanded 39 per cent to Rs 746 crore in the quarter under review. While there was slight pressure on asset quality, gross non-performing assets (NPA) at the end of the December 2015 quarter stood at 0.66 per cent, compared to 0.42 per cent in the year-ago period.
In the same period, net NPA increased to 0.22 per cent from 0.10 per cent. Provisions, too, doubled to Rs 148 crore from Rs 70 crore .At the end of the September 2015 quarter, gross NPA and net NPA stood at 0.61 per cent and 0.20 per cent, respectively.
“Among 36 other banks, even we were subjected to an asset quality review by the Reserve Bank of India and the number for the quarter fully reflects the review undertaken. There will be no spill over in the coming quarter. In fact, we have reduced the credit cost guidance from 50-70 basis points (bps) for FY16 to a maximum of 50 bps for this financial year,” said Rana Kapoor, managing director and chief executive, YES Bank.
The credit cost for the first nine months of FY16 stood at 34 bps. Kapoor hinted there might be an increase in provisioning in the March 2016 quarter, but it will be within the credit cost outlined.
The management considers electricity as a sensitive sector, whose outlook is improving. The lender has not made any sale to an asset reconstruction company or undertaken any strategic debt reconstruction scheme in the third quarter of this financial year.
Net interest margin, a key indicator of the bank’s profitability, expanded by 20 bps from the December quarter of FY15 to 3.4 per cent in the same quarter in the current financial year. The improvement in margin was led by the rising share of low-cost current and savings account deposits (Casa) to 26.6 per cent at the end of the third quarter of this financial year.
The bank remains well capitalised with a capital adequacy ratio of 16.1 per cent. The lender also raised Rs 1,500 crore of Tier-2 bonds in the quarter under review.
“The bank’s asset quality performance has held up well so far. Going forward, we have factored in higher provisions and slippages given the bank’s corporate exposure to metals and EPC (engineering, procurement and construction). Even after factoring the higher provisions and slippages, we expect YES Bank to deliver a CAGR (compounded annual growth rate) of 20.5 per cent in earnings for FY2015-17E,” said Vaibhav Agrawal, vice-president, research — banking at Angel Broking.