YES Bank net up 27% on interest income

Net Interest Margin, a key indicator of bank's profitability, expanded to 3.4% as compared to 3.2% in the quarter ended December

Private sector lender YES Bank reported a 27 per cent growth in net profit in the January-March 2016 quarter at Rs 702 crore, compared to Rs 551 crore in the corresponding quarter a year ago. The profits increased on the back of high net interest income (NII) and other income. For FY16 as well, net profit increased 27 per cent to Rs 2,539 crore.

NII, the difference between interest earned and interest expended, grew 27.1 per cent to Rs 1,241.4 crore. Rana Kapoor, managing director and chief executive officer of YES Bank, said the increase in NII was on the back of strong growth in advances and improvement in the share of low-cost current and savings account deposits.

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Other income, which includes treasury gains, income from fees, commission etc, also increased 36 per cent to Rs 803 crore. The biggest contributor to the gain in other income was corporate fees, followed by retail fees.

 

There was slight pressure on asset quality. However, it continues to remain fairly stable with gross non-performing assets (NPAs) at the end of the March quarter at 0.76 per cent compared to 0.41 per cent in the corresponding quarter of the last financial year. In the same period, net NPA also inched up to 0.29 per cent compared to 0.12 per cent. At the end of the September 2015 quarter, gross NPA and net NPA stood at 0.66 per cent and 0.22 per cent, respectively.

“Despite the heightened risk environment, we have managed to contain the credit cost at 50 basis points (bps) for FY16. The worst is behind us and we will not exceed credit cost of 50-70 bps in FY17,” said Kapoor.

The management sold loans worth Rs 60 crore to asset reconstruction companies. However, there was no strategic debt restructuring or 5/25 scheme undertaken in the last financial year. The bank has also fully factored in the “asset quality review” that they had to undertake under the Reserve Bank of India’s guidance according to which the lenders were directed to recognise stressed assets as NPAs. With the increase in bad loans, provisions also increased 48 per cent to Rs 186.5 crore. However, the management credited the sharp increase in provisions mainly to the increase in advances that grew 30 per cent. Even going ahead, the lender believes it would be able to maintain a credit growth of 27-30 per cent.

YES Bank’s net interest margin, a key indicator of a bank’s profitability, expanded to 3.4 per cent compared to 3.2 per cent in the quarter ended December. In FY17, the management has guided for a further expansion in NIM by 10-15 bps.

“We’ll be able to expand NIM as we believe that the share of casa (current and savings accounts) will improve and that will aid margins. Doing more priority-sector lending or our own instead of buying it from outside and the issuance of green bonds will also help in expanding margins,” added Kapoor.

The bank remains well-capitalised with a capital adequacy ratio of 16.5 per cent. The lender had raised Rs 3,889 crore of Basel-III-compliant tier-II bonds during FY16. YES Bank also had a valid approval to raise $1 billion via qualified institutional placements, American depository receipts, and global depository receipts by June 2016, the deadline for which has been extended by one year.