At a time when growth in deposits and loans in the banking sector is at abysmal levels, YES Bank continues to see strong traction in loans, healthy deposit growth, improvement in margins and stable asset quality. The robust 32.8 per cent growth in earnings in the June quarter is due to well-rounded performance across various parameters.
After a healthy 26 per cent year-on-year growth in net profit in the 2016 fiscal, YES Bank’s performance in the current fiscal has started on an upbeat note. The bank continues to deliver strong loan growth, which has kept its earnings performance healthy in the June quarter as well.
The 33 per cent growth in loans was driven by both the corporate and retail segments. The corporate segment still contributes the chunk — 67.5 per cent of total loans for the bank. However, going ahead, the small and medium enterprise (SME) and retail segments are expected to drive growth. The bank has been improving its retail and business banking mix over the past year.
The healthy growth in loans led to a strong net interest income growth of 24 per cent during the June quarter. The net interest margin has inched up to 3.4 per cent, from 3.3 per cent in the same period last year. This is despite lending rates falling over the last one year.
Key driver of margins For YES Bank, its strong growth in low-cost deposits has been a key driver of margins. The bank has been able to grow its CASA (current account, savings account) deposits at 44 per cent annually over the last five years. Improving low-cost CASA ratio continues to aid margin expansion. CASA grew a robust 63 per cent year-on-year in the June quarter, forming 29.6 per cent of deposits. This is a sharp jump from 10-odd per cent levels about five years back. Following the deregulation of interest rates on savings accounts from October 2011, YES Bank was the first lender to offer differentiated rates, and was able to increase its share in savings accounts significantly over the years. But after building a notable deposit base, the bank has been trimming its rate on savings accounts, which also to some extent has helped margins, aside from the incremental growth in CASA.
The bank had (effective last November) lowered its interest on savings accounts from 7 per cent to 6 per cent.
The bank’s gross non-performing assets as a per cent of loans came in at 0.79 per cent as of June 2016, more or less in sync with the March quarter figures.
The restructured book has also remained steady at about 0.49 per cent of loans in the June quarter (marginally lower than in the March quarter). During the quarter, there was no sale of asset to asset reconstruction companies and no restructuring under the 5:25 scheme. One account worth ₹34.3 crore (0.03 per cent of loans) though, has been restructured under the strategic debt restructuring (SDR).