After being in the news for not so pleasant reasons, the sentiment is improving for YES Bank. The stock rose six per cent on Wednesday, on strong June quarter
(Q1) performance. The board of directors had also approved a 5:1 stock split, another reason supporting the price move.
Net profit rose 32 per cent year-on-year to Rs 965 crore, helped by 44 per cent growth in net interest income (difference between interest earned and expended) to Rs 1,809 crore. Other income rose 17 per cent to Rs 1,132 crore. Net interest margins (NIMs), an indicator profitability, rose from 3.4 per cent a year before to 3.7 per cent. This was aided by a surge in low-cost current and savings account (Casa) deposits. The ratio of these to the total improved to 36.8 per cent, backed by 52 per cent year-on-year growth in Casa.
Strong balance sheet growth, equally led by advances and deposits, was reflected in the performance. Advances for the quarter grew by 32 per cent to Rs 1,39,971 crore. Multifold expansion in the retail (concerning small depositors and borrowers) and business banking segment, 32 per cent of total advances, fuelled the loan book growth. Total deposits grew by 22 per cent to Rs 150,241 crore. However, with the higher retail activity, the cost-to-income ratio increased to 42.1 per cent, as against 41.1 per cent a year before. YES Bank hopes to maintain the ratio at 40 per cent, by reducing branch model costs and focusing on digital channels.
While these are positive, a rise in non-performing assets (NPA) is a blip. The bank's asset quality marginally deteriorated, as the gross NPA
ratio rose by 18 basis points over a year to 0.97 per cent. The net NPA
ratio also increased, to 0.39 per cent versus 0.29 per cent in the June ’16 quarter. This is despite an upgradation seen in one account with exposure of Rs 911.5 crore, classified as NPA
in the March quarter.
In absolute terms, gross NPA
increased by 61 per cent to Rs 1,364 crore, while net NPA
grew 80 per cent to Rs 545 crore. The provision coverage ratio was 60 per cent. For now, analysts say the rise in NPAs isn’t a concern but they will keep a watch on it.