- PSL Buckets Growth: Small and marginal farmer up by 1.6x, noncorporate farmer up by 1.4x, weaker section up by 1.2x from March '23 levels.
- Branch Banking Deposits: Increased to 55% from 52% at the beginning of the year.
- Branch Banking CASA Growth: 18.2% compared to 12.2% at Yes Bank and 7.2% for peers.
- Retail Advances Internal Sourcing: Improved to 43% from 37% at the beginning of the year.
- Core Fee Income Growth: Between 23% to 35% YoY in all three quarters of the current fiscal.
- Operating Expenses Growth: Less than 1% quarter-on-quarter growth in Q3.
- YoY Deposit Growth: 15%, excluding certificate of deposits.
- YoY Advances Growth: 13.6%, excluding interbank reverse repo.
- CASA Ratio: Improved to 29.7% from 29.4% sequentially.
- New Retail CASA Accounts: Nearly 4 lakh added during the quarter.
- Branch Banking Deposits Growth: 22% YoY.
- SME and Mid-Market Advances Growth: Up 24% and 26.4% YoY, respectively.
- CD Ratio: 89.9% at December quarter-end.
- Liquidity Coverage Ratio: 118.4% for the quarter.
- CET Ratio: 12.6% for the quarter.
- Net Interest Margin: Expanded by 10 basis points to 2.4% quarter on quarter.
- Noninterest Income: INR1,195 crore for Q3.
- Operating Expenses: INR2,347 crore, up 10.6% YoY and 0.6% quarter on quarter.
- Provision Costs: 0.6%, flattish quarter on quarter.
- Net NPA Reduction: 30 basis points quarter on quarter.
- Recoveries and Resolution: INR1,316 crore in Q3.
- Provision Coverage Ratio: Improved to 56.6%, and 71.9% including technical write-offs.
- Net Profit: INR231 crore, up by 349% YoY and 2.8% quarter on quarter.
Release Date: January 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Yes Bank Ltd (BOM:532648, Financial) reported a year-over-year deposit growth of 15%, outpacing the advances growth of 13.6%.
- The CASA ratio improved sequentially to 29.7% from 29.4%, with significant growth in savings accounts.
- The bank's branch banking deposits increased to 55% of total deposits, reflecting a strong focus on branch banking.
- Noninterest income grew by 23.4% year-over-year, driven by core fee income growth.
- The net profit for Q3 was INR 231 crore, marking a 349% year-over-year increase.
Negative Points
- The CET ratio declined to 12.6% from 13% in the previous quarter, impacted by regulatory-mandated risk weight increases.
- Retail slippages were higher this quarter, particularly in the unsecured loan segment.
- Operating expenses increased by 10.6% year-over-year, although the quarter-on-quarter growth was less than 1%.
- The provision coverage ratio, excluding technical write-offs, is still relatively low at 56.6%.
- The bank's net interest margin remains low at 2.4%, despite a slight quarter-on-quarter improvement.
Q & A Highlights
Q: Is there anything in future for the AT1 bonds, any provisions to be made?
A: [Prashant Kumar, CEO] This issue has been discussed in detail earlier. Since the matter is pending in the honorable Supreme Court, we would not like to make any comment on this at this point of time.
Q: When is the next date in the Supreme Court for the AT1 bonds case?
A: [Prashant Kumar, CEO] The case was slated to appear today, but it has not come in the final listing. We will come to know from the registry of the honorable Supreme Court when it will come on the next date.
Q: How are you seeing the cost of funds moving over the next couple of quarters?
A: [Niranjan Banodkar, CFO] The bulk of the repricing has been absorbed till September. We are not expecting any material impact over the next one or two quarters. However, we are conscious of the industry and liquidity landscape, which could mean that there could be room for us to continue to work on this.
Q: What is driving the higher retail slippages this quarter?
A: [Prashant Kumar, CEO] The slippages are largely from the unsecured assets and some minor segments. We have taken measures to revise scorecards and tighten credit processes. We expect the slippages to stabilize and then start declining in the coming quarters.
Q: Could you disclose the risk-weighted assets and explain the movement in CET 1 this quarter?
A: [Niranjan Banodkar, CFO] The risk-weighted assets are about INR2.7 trillion, up from INR2.58 trillion in the previous quarter. The increase is mainly due to the new RBI circular. We had about 40 basis points of burn from the new circular and a net 10 basis points of consumption from growth, profitability, DTA, and rating profile improvements.
Q: What is contributing to the higher CASA growth relative to peers?
A: [Niranjan Banodkar, CFO] We are operating at a 29.7% CASA ratio and have a focused execution plan to improve it. This includes productivity efficiencies at the branch level, monitoring profitability, and aligning incentive structures. Our blended SA rate has not increased, indicating hard-core execution in retail to drive balances.
Q: Why were tightening measures required in personal loans?
A: [Prashant Kumar, CEO] The segments of concern were new-to-credit customers and those with income levels below INR30,000 a month. These segments started showing stress, leading to policy cuts. This is an industry-wide issue, not just for us.
Q: What is the difference between the net carrying value of security receipts and the gross amount?
A: [Prashant Kumar, CEO] The net carrying value of security receipts is 0.8% after making provisions. Once the net carrying value comes down to zero, any recovery would directly add to the P&L.
Q: What is the guidance for ROA-accretive products from the current level of 55%?
A: [Prashant Kumar, CEO] We aim to improve the mix of ROA-accretive products by 5% to 10% over the next six to nine months. These products generate an ROA about 60 to 70 basis points higher than others, but it will take time to reflect on the book.
Q: Why is there a deviation from market expectations in profit figures?
A: [Niranjan Banodkar, CFO] We have a long-term strategy towards achieving a 1% ROA, which involves reducing the drag from RIDF and improving core operating profits. External factors like interest rate spikes have also impacted NIM compression. We will work on better managing market expectations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
