Yes Bank Ltd delivered better-than-expected results for the December quarter as it continued to focus on expanding its retail and corporate operations. Not surprisingly, the stock touched its life-time high during intraday trade.
Net interest income (NII) grew 36.7% from the same period last year. Non-NII rose 48% as the financial advisory business more than doubled. Operating profit grew 41%, better than the 26% growth clocked in the previous quarter.
Low-cost current and savings account deposits (CASA) made for 18.3% of the deposits in the December quarter, up from 17.3% in the September quarter. Since the savings rate deregulation in October 2011, Yes Bank has offered one of the highest savings rates, attracting customers, analysts said.
As a result, overall retail deposits as a proportion of total deposits improved to 37.8% from 36.6% in the previous quarter. The corporate loan portfolio remained steady at 65.9%. Net interest margins improved 20 basis points (bps) to 3% mainly due to a drop in wholesale funding costs and the rise in savings deposits. The cost of funding fell only marginally, with the yield on advances improving by 10 bps sequentially. A basis point is 0.01%.
Provisions more than doubled to Rs.57 crore. This was on account of contingent provisioning on one entity that’s not a non-performing asset (NPA), said Jaideep Iyer, deputy chief financial officer at Yes Bank.
Gross NPAs increased marginally from last year, but fell 26% sequentially, which is healthy in a fragile economy.
The management said that in the last two quarters the bank made provisions for 80% of problem accounts and the remaining 20% will be covered from assets. Provisioning coverage ratio slipped marginally to 79.6% sequentially.
If one clubs credit substitutes with loans, then total customer assets grew 27.4%, slower than 32.5% year-on-year growth in the previous quarter because it sold some liquid investments.
Yes Bank’s share price has doubled in the last one year, but is still trading at a discount against other private bank peers in terms of price-to-book ratio. Iyer said, “Net interest margins will have tailwinds if policy rates and CASA improve, and asset quality risks are also mitigating.”
Hence, as long as Yes Bank continues to expand retail operations, the shares may continue to perform well.