Yes Bank, a private lender based in India, announced a 10.3% rise in quarterly net profit for the April-June period, amounting to 3.43 billion rupees ($5.25 million), when compared to the corresponding period in the previous year. However, the net profit missed analysts’ average forecast of 3.80 billion rupees, dampened by higher provisions and contingencies set aside for ageing bad loans and security receipts. The bank allocated 3.60 billion rupees for provisions, more than double the 1.75 billion rupees from the previous year.
Yes Bank allocated 45.73 billion rupees for its outstanding security receipts, which amounted to 72.24 billion rupees. Despite this, the bank showed some improvement in its asset quality, with the gross non-performing asset (NPA) ratio declining to 2% at the end of June, compared to 2.20% at the end of March. The net NPA ratio increased slightly to 1% from 0.80%.
Yes Bank experienced an 8.1% increase in its net interest income, reaching 20 billion rupees, which represents the difference between the interest earned on loans and the interest paid to depositors. The net interest margin, a crucial profitability indicator for banks, rose to 2.5% from 2.40% in the previous year. However, the bank anticipates pressure on margins in the current quarter as deposits are priced, according to Prashant Kumar, the managing director, and chief executive.
The bank experienced a 10% increase in advances year-on-year, primarily led by retail loans, while deposits rose by 13.5%. For this financial year, Yes Bank aims for credit growth between 15% and 20% and deposit growth of 20%. Kumar expressed the bank’s intention to expand its corporate loan book in the coming quarters with appropriate risk pricing, despite experiencing a decline in the corporate loan book during the quarter.
Yes Bank’s performance in the April-June quarter reflects its ongoing efforts to strengthen its asset quality and manage risk amid the challenging economic environment caused by the COVID-19 pandemic. The bank’s increase in provisions and contingencies demonstrates a cautious approach towards addressing potential loan impairments and ensuring a healthy balance sheet.
With the gross non-performing asset (NPA) ratio declining to 2% and the net NPA ratio showing a slight increase to 1%, Yes Bank is making progress in reducing the burden of bad loans. The bank’s focus on containing NPAs is crucial for maintaining investor confidence and enhancing its overall financial stability.
The rise in net interest income and net interest margin indicates that Yes Bank’s core banking operations are performing reasonably well. As the bank aims for credit growth between 15% and 20%, it is essential for Yes Bank to strike a balance between expanding its loan portfolio and managing credit risk. By targeting appropriate risk pricing for corporate loans, the bank aims to grow its corporate loan book in the coming quarters while ensuring the quality of its assets remains intact.
As Yes Bank navigates its growth trajectory, maintaining a healthy capital adequacy ratio will be crucial to support its expansion plans and withstand any potential economic downturns. Striking a balance between credit growth and maintaining adequate capital buffers is essential for the bank to safeguard against potential risks and regulatory requirements.
In conclusion, Yes Bank’s performance in the April-June quarter reflects its commitment to enhancing asset quality, managing risk, and driving growth in a challenging economic landscape. As the bank continues to implement its strategic initiatives, investors and stakeholders will closely monitor its progress in meeting credit and deposit growth targets, managing provisions, and improving overall profitability. By maintaining prudence in its operations and focusing on prudent risk management, Yes Bank aims to position itself for sustainable growth and long-term success in the Indian banking sector.
