Yes Bank Ltd’s results for the September quarter are better than Street expectations. This is evident from the 1.4% rise in Yes Bank’s stock price to Rs 352.15 per share on a day the Bombay Stock Exchange’s (BSE) Bankex lost 0.50%.
The bank’s net interest income (NII), the difference between interest earned and expended, increased by 78% over the same period last year to Rs 313 crore.
The growth in NII is higher than the 67% increase witnessed in the June quarter. The growth was helped by an 86.3% increase in advances and a relatively stable net interest margin (NIM) of three percentage points. NIM is the difference between what a bank charges for loans and pays for deposits. The bank’s NIM declined by 10 basis points compared to last year. One basis point is one-hundredth of a percentage point.
Growth in advances for other banks that released their numbers was much lower. For instance, advances at Axis Bank Ltd and HDFC Bank Ltd increased by 36-38%, respectively. But of course, Yes Bank’s growth in advances is on a much lower base.
Yes Bank’s advances grew at a slower pace compared with the June quarter when advances were up by 107%.
Even as core income grew at a high rate, non-interest income fell by 3.3%. That was because bond prices have fallen versus last year, which has hit income from financial markets, included in non-interest income. Income from financial markets stood at Rs 14 crore compared with Rs 49.6 crore a year ago.
Operating profit thus grew at a slower rate of 47% to Rs 281.41 crore. However, a 25% decline in provisions and contingencies helped net profit grow by 58% to Rs 176.26 crore. Net profit had grown by 56% in the June quarter.
The decline in provisions can be attributed to improvement in asset quality. Gross non-performing asets fell to 0.22% of total advances against 0.31% in the year-ago quarter.
Yes Bank’s stock has outperformed the BSE Bankex since the beginning of this fiscal, tracking the company’s high growth rate. But with the stock now trading at 2.7 times its FY12 book value, most positives seem to be priced in.