YES Bank posted a net profit of ₹225 crore for Q2 FY24, up 47.4 per cent y-o-y on the back of fall in provisions and strong recoveries. However, on a sequential basis, profit after tax was 34.3 per cent lower due to muted loan growth and margin compression.

Advances grew 8.7 per cent y-o-y and 4.4 per cent q-o-q to ₹2.1 lakh crore. Retail loans rose 27 per cent y-o-y, accounting for 48 per cent of total loans. SME loans were up 25 per cent and mid corporate loans by 27 per cent.

In the post earnings call, MD and CEO Prashant Kumar said the corporate book has been falling due to continued pricing pressure in the segment and the bank’s focus on profitable growth. On the retail side, the bank has been strategically going slower in certain segments such as unsecured, barring which retail loan growth would have been 30 per cent y-o-y.

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Advances growth for the bank will be in the “mid-teens” for FY24 whereas deposit growth will be slightly higher at around 18 per cent, Kumar said, adding that the bank would like to maintain the share of retail loans at around 50 per cent.

Net interest income (NII) fell 3.3 per cent y-o-y and 3.7 per cent q-o-q to ₹1,925 crore due to a decline in net interest margin (NIM) by 30 bps y-o-y and 20 bps q-o-q to 2.3 per cent for the quarter.

Kumar said Q2 is the “end or near-end” of this margin compression and the bank should see margin expansion of about 20 bps hereon, pegging NIM for FY24 at 2-2.5 per cent and credit cost at 50 bps.

The bank said it also seeing good momentum in CASA deposits and their share is not expected to deteriorate further, which should also support margins. Credit-deposit (CD) ratio stood at 89.2 per cent compared with 91.3 per cent last quarter and 96.1 per cent last year, and the bank aims to maintain it at 89-90 per cent for FY24.

Deposits of the bank grew 17.2 per cent y-o-y and 6.8 per cent q-o-q to ₹2.3 lakh crore led by 19 per cent rise in retail and small business deposits. CASA ratio stood at 29.4 per cent.

Portfolio quality

Gross slippages for Q2FY24 were ₹1,199 crore whereas loan recoveries and upgrades were ₹1,352 crore. The bank said resolution momentum continues to be strong and is helping fortify the balance sheet led by robust redemptions of ₹578 crore from Security Receipts — largely from the sale of NPAs to JC Flowers ARC.

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Two-thirds of the slippages were from the retail portfolio whereas corporate slippages remain controlled, Kumar said. While there is a trend of increased delinquencies in unsecured loans, especially in the 30 dpd(days past due) segment, the bounce rates and collection efficiency levels continue to be steady and asset quality concerns are “not significant” for the bank.

Gross NPA ratio was at 2 per cent, flat from a quarter ago but much better than 12.9 per cent in the year-ago period. Retail gross NPA was at 1.4 per cent, wherein the figure for credit cards was 2.1 per cent.

Net NPA ratio at 0.9 per cent was also better than 1 per cent in the previous quarter and 3.6 per cent in the previous year, and the bank expects it to fall to 0.75 per cent by the end of the current financial year.

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