YES Bank net profit up 26.5%, asset quality worsens

Advances during the quarter were up by 29% year-on-year to Rs 80,0151 crore

Private sector lender YES Bank reported a 26.5 per cent increase in net profit in the July-September quarter to Rs 610 crore from Rs 483 crore in the corresponding quarter a year-ago. The profits rose on the back of robust growth in advances and higher other income, led by treasury gains.

Net interest income — the difference between interest earned and interest expended — grew 29 per cent to Rs 1,109 crore. Other income grew by 22 per cent to Rs 618 crore. Gains from forex, debt capital markets and securities were up 75 per cent. However, income from corporate trade and cash management was down 13 per cent.

However, asset quality worsened with gross non-performing assets (NPA) rising to 0.61 per cent of gross advances in end-September from 0.36 per cent in the same quarter a year-ago. Gross NPA was 0.46 per cent end-June.

Net NPA also increased to 0.20 per cent from 0.09 per cent in the quarter ended September, last financial year. The management said that this rise in bad loans was reflective of the credit environment. However, they downplayed any concerns on the rising NPA.

“At the start of this financial year, we had given a credit cost guidance of 50-70 basis points (bps) and we are well within the range. The credit cost has gone up by only 54 bps. Also, the overall base for NPA is still very low,” said Rana Kapoor, managing director & chief executive officer of YES Bank.

Despite the increase in NPA, provisions came down by 13 per cent to Rs 104 crore compared to the same quarter last financial year. Kapoor said that there were recoveries in the quarter leading to lower provision requirement.

Net interest margin — a key indicator of a bank’s profitability — increased by 10 bps on a year-on-year basis to 3.3 per cent. On a sequential basis, it remained flat which the management explained was a result of a base rate cut that the bank had undertaken in the previous quarter.

Advances during the quarter were up by 29 per cent year-on-year to Rs 80,0151 crore, driven by retail loans and corporate credit. In the same period, deposits grew by 24 per cent to Rs 99,344 crore. The share of current and savings account deposits also grew to 25.5 per cent.

The capital adequacy ratio of the bank was at 14.9%. The lender also has the enabling provision to raise $ one billion which it plans to raise in the calendar year 2016. "We will need the capital in 2016 so we are planning to raise it in the next calendar year. We haven't decided how we are going to raise it. It can be either via QIP or ADR/GDR issue," said Kapoor.

 

‘Not looking at an equity tie-up with a payments bank’

YES Bank has said that instead of tying up with one payments banks player, they will look at multiple partners and so are not looking at an equity investment. “We believe that multiple alliances are better than a restrictive single partnership,” said Kapoor.

The lender has also got approval from the Reserve Bank of India to set up an asset management company (AMC). Kapoor said that the AMC business will also be sector-driven and will focus on the growth sectors and on exchange-traded fund. The lender is in the process of getting an approval from the Securities & Exchange Board of India for the AMC business.