Yes Bank Q2 net profit jumps 48% on low base; says unsecured book reporting stress

Yes Bank on Saturday reported an over 47% increase in its net profit at Rs 228.64 crore in the September quarter on a lower base, and also indicated that it is witnessing higher delinquencies in unsecured loans. The city-headquartered private sector lender had reported a post-tax profit of Rs 160.41 crore in the year-ago period, but the same was Rs 347 crore in the quarter-ago period.

Its core net interest income was Rs 1,925 crore for the reporting quarter despite an 11.2% loan growth, and the management attributed the fall to a 0.30 percentage point compression in the net interest margins (NIM) to 2.3%.

The bank got a 0.20 percentage point impact on the NIMs from the repricing of past deposits on elevated interest rates and another 0.35-0.40 percentage point drag came from shortfalls in the priority sector lending targets, wherein the money is deposited in low-yielding Rural Infrastructure Development Fund.

Its managing director and chief executive Prashant Kumar said that the bank is at the "near end" of the slip on the NIMs front and is aiming at expanding the number hereon.

The hit on the deposit repricing will not be witnessed again, while on the PSL part, where it is struggling to meet the sub-targets on lending to small and marginal farming segment, it is looking at purchasing PSL certificates from the market, organic expansion of loan books.

Kumar said the bank is also on the lookout to buy a microlender but does not have anything to disclose on the matter as yet.

The bank is aiming for a 15% loan book growth and an 18% expansion in deposits for FY24, Kumar said.

When asked about the RBI's worries about unsecured loans like credit cards and personal loans, Kumar said the bank has witnessed increased delinquencies on the portfolio recently, especially in the assets which are overdue for over 30 days but are yet to slip into non-performing assets.

The gross NPAs from the unsecured loans stood at 2.1%, which is higher than the retail NPAs of 1.4% and the overall 2% for the bank.

Kumar said the bank has taken a call on being cautious on retail assets growth strategy, given the higher stress on the unsecured loans and reaching an optimum level of 48% contribution of retail in the overall assets mix.

In the September quarter, two-thirds of the fresh slippages of Rs 1,200 crore were from the retail loans, Kumar said, adding that the corporate loans which had come to haunt the bank in the past are behaving well.

The overall provisions came at Rs 505 crore as against Rs 583 crore in the year-ago period and Kumar added that the bank is maintaining its guidance on the overall credit costs.

The bank is looking to open another 150 new branches in FY24, and has already opened 20 branches of those, Kumar said.

Its overall capital adequacy stood at 17.1% as of September 30, 2023, and it does not have any plan of a fund raise, Kumar said.