YES Bank’s stellar core performance, moderation in slippages (barring those related to its IL&FS exposure), and the RBI’s approval for Ravneet Singh Gill as the bank’s new Chief Executive Officer (CEO) appear to have cheered investors.

The stock, which has been weighed down by overhang over the bank’s leadership and asset quality woes, zoomed 10 per cent after the announcement of the results on Thursday.

While the strong growth in loans and core net interest income, healthy traction in deposits, and pick-up in share of retail loans are positives, the FY18 risk-based supervision report, awaited by the RBI, remains a key overhang.

While the appointment of the new CEO lends comfort, uncertainty remains on the course of his future actions with regard to the core business and clean-up of balance sheet.

Divergence uncertainty

The sharp rise in gross slippages to ₹1,631 crore in the previous September quarter had brought the focus back on the bank’s asset quality. In the latest December quarter, while overall slippages were higher at ₹2,297 crore, it includes ₹1,913 crore of slippages on account of the bank’s IL&FS exposure.

Thus, excluding the IL&FS impact, YES Bank’s asset quality performance appears to have improved somewhat from the September quarter. That said, the bank was weighed down by asset quality woes over the past year, and it is still early to gauge whether the lender is entirely out of the woods.

YES Bank had reported sharp divergences in the September 2017 quarter (pertaining to FY17).

Any sharp rise in slippages on account of this can impact earnings in the coming quarters.

Given the lacklustre growth within the industry, YES Bank’s 42 per cent Y-o-Y growth in advances in the December quarter is noteworthy.

While the bank, predominantly a corporate lender, continues to witness robust growth in the corporate segment (42 per cent), retail loans, too, have delivered on a smaller base growing at 82.9 per cent.

Retail loans

The share of retail loans has shot up from 11.8 per cent last year to 15.2 per cent in the latest December quarter.

While the bank’s core performance remains strong, the trend in slippages will be key to drive earnings in the coming quarters.