That Yes Bank Ltd was expected to show excellent results for the March quarter was well known. That’s the reason the Yes Bank scrip went up 12.9% between 19 April and 26 April, far more than the rise in the BSE Bankex over the period. That’s also why, in spite of the good results, the stock came in for a bout of profit-taking on Tuesday, falling 2.1%.
In the March quarter, Yes Bank’s profit was up 74.8%, propelled by growth in net interest income of 62.9%, which in turn was a function of a huge 78.9% year-on-year (y-o-y) growth in advances. Nor is it just y-o-y growth—compared with end-December, outstanding advances were up a blistering 18.6%. Deposits were up 21.6% at end-March compared with end-December.
Margins too were maintained, with the net interest margin edging up a bit from 3.1% in the December quarter to 3.2% in the March quarter, shored up by the capital raised. The cost-to-income ratio was maintained at 36%. And non-interest income growth provided the icing on the cake, growing 68% y-o-y and 25% over the December quarter. Current and savings account (Casa) deposits constitute 10.5% of total deposits, up from 10.1% at end-December.
Graphic: Yogesh Kumar / Mint
Net non-performing assets were a minuscule 0.06% of net advances. Gross non-performing assets have increased from Rs50 crore at the end of September to Rs54.2 crore at end-December to Rs60.2 crore at end-March, but it’s a mere 0.27% of gross advances. What’s more, restructured advances are now Rs80 crore, compared with Rs134 crore at the end of December.
Yes Bank initiated a move away from its dependence on advances to the corporate and institutional banking sector, with the share of this segment shrinking from 72.6% of total advances at end-December to 69.1% by end-March. In the current fiscal, loan growth won’t be quite so high, with a target of 40-45%. The bank has already said it will raise more capital. Costs too are bound to rise as the bank opens new branches and rolls out its retail strategy.
At its current price, the bank trades at a price-to-book value of 3 based on its March 2010 book value and 2.3 on the basis of estimates for FY11. While the bank’s Casa needs to improve rapidly, its high return on assets, significant expansion plans and strategy to pursue the next phase of growth should enable it to get even higher valuations.