Yes Bank Q4 net rises 109%

No provision for derivatives transactions as bank says there's no delinquency.

Yes Bank, one of the new-generation private banks, on Wednesday said that its net profit more than doubled in the fourth quarter ended March 2008.

The bank said it has so far not faced any delinquency on its derivatives exposure and has therefore made no provisions for such transactions. 

VITAL STATS
	Jan-Mar 2007 (in Rs cr)	Jan-Mar 2008 (in Rs cr)	Growth (per cent)
Interest income	202.40	388.50	92.00
Net income	125.00	214.30	71.40
Operating profit	59.80	120.90	102.40
Provisions & contingencies	12.70	22.80	80.10
Provision for tax	16.20	33.60	107.60
Profit after tax	30.90	64.50	108.70

"The growth in profit is driven by a combination of loan and deposit growth.Our distribution, advisory and transaction banking business has also contributed to the growth in profits," said Rana Kapoor, managing director and chief executive officer of the bank.

While net profit went up 108.7 per cent to Rs 64.5 crore, total income was up 75.9 per cent to Rs 494.3 crore, compared to Rs 281.09 crore during January-March 2007.

The bank's advances grew 50 per cent to Rs 9,430 crore, from Rs. 6,290 crore as on March 31, 2008. The deposit base rose 61.5 per cent to Rs.13,273 crore, from Rs. 8,220 crore for the same period.

Yes Bank's provisions and contingencies rose 80.1 per cent to Rs 22.8 crore, compared to Rs 12.7 crore during January-March 2007. Kapoor said Rs 17 crore has been set aside as "credit contingency" as it had the headroom.

"The bank has made no specific provisions for any derivative account. On account of the earning headroom, the bank has earmarked Rs 17 crore as credit contingency for the future. Additionally, a provision of Rs 1.7 crore has been made towards one corporate account which is an agricultural loan," Kapoor said.

There is an overdue treasury receivable of around Rs 40 lakh which has been due for the last 10-15 days, but Kapoor said it was not related to derivatives.

"None of the bank clients has defaulted as on March 31, 2008. All receivables are fully current and paying. Most contracts are paying regularly, indicating the willingness and ability of clients to pay up. There is no significant impact on fee growth as clients switch out of derivatives, given the uncertain currency environment.

"Clients moving into traditional hedge instruments, essentially a switch-out of low-churn, high-commission products into high-churn, lower-commission products. Even after assuming zero derivative fees in financial year 2009, the impact on profit will be just 12 per cent," he added.

Kapoor said Yes Bank has around 130 foreign exchange clients, of which 70 per cent are large corporates and 30 per cent are medium sized companies.

About half of its derivatives exposure was to AA or AAA-rated companies. Similarly, nearly half the exposure is to Euro and US dollar contracts and 36 per cent is to Swiss francs.

"We estimate that the economic impact, even if all current exposures default, would be negligible on book value. We have no exposure to small and medium enterprises sector. We have filtered our clients carefully," he said.

Of the total deposits current and saving account base, the low-cost source of funds, is about 8.5 per cent. Net interest margin was pegged at around 3.06 per cent, as against to 2.6 per cent in the fourth quarter of 2006-07. Yes Bank's cost of funds stood at 8.4 per cent, while capital adequacy, as on March 31, 2008, was 13.64 per cent.

Of the total advances, retail constitutes one per cent, while corporate lending was the major chunk of the loan book.

"The bank has invested in building the infrastructure to build the retail business. Now we are building a regional footprint. In the next two years, we will grow our retail book. The retail growth will largely focus on growth in deposits and distribution business which includes selling of third party products.

"The bank will refrain from getting into the retail loans business as it is largely competitive hence not attractive in terms of margins," added Kapoor.

Yes Bank shares went up 4.65 per cent to close at Rs 169.65 on the Bombay Stock Exchange.