YES Bank Q1 profit rises 50.2% to Rs 311 cr on improved interest margins

YES Bank's net interest income rose by 32 per cent in Q1FY23 to Rs 1,850 crore from Rs 1,404 crore in Q1FY22

YES Bank on Saturday reported a 50.2 per cent year on year (YoY) increase in net profit at Rs 311 crore in the quarter ending June 30, 2022 (Q1FY23), on the back of improvement in interest margins and fall in provisions and contingencies.

The private sector lender had posted a net profit of Rs 207 crore during the same period last year (Q1FY22). Sequentially, its net profit declined by 15.5 per cent from Rs 367 crore in Q4FY22.

The bank’s stock had closed 2.94 per cent higher at Rs 14.71 per share on BSE on Friday.

The lender's net interest income (NII) rose by 32 per cent in Q1FY23 to Rs 1,850 crore from Rs 1,404 crore in Q1FY22. Sequentially, the NII was up by 1.7 per cent from Rs 1,819 crore in the quarter ended March 2022.

Its net interest margin (NIM) improved to 2.4 per cent in Q1FY23 from 2.1 per cent a year ago, but declined from 2.5 per cent in Q4FY22.

Other income fell by 10.1 per cent YoY to Rs 781 crore from Rs 869 crore in Q1FY22 and was down 11.4 per cent over Rs 882 crore in Q4FY22.

The provisions fell by 61.8 per cent to Rs 175 crore in Q1FY23 from Rs 457 crore in the year ago quarter. Sequentially, also they were down 35.5 per cent from Rs 271 crore in Q4FY22.

The bank’s asset quality profile improved with gross non-performing assets (GNPAs) declining to 13.45 per cent in Q1FY23 from 15.6 per cent in Q1FY22 and 13.93 per cent in Q4FY22.

Net NPAs dipped to 4.17 per cent at end of Q1FY23 from 5.78 per cent a year ago and sequentially down from 4.53 per cent at the end of Q4FY22. The provision coverage ratio (PCR) rose to 82.3 per cent for the quarter under review from 79.3 per cent in the previous year and 81.5 per cent in Q4FY22.

The bank identified stressed loan portfolio aggregating to up to Rs 48,000 crore for sale to asset reconstruction company (ARC). It has already signed a pact with JCF LLC for forming ARC which would acquire a stressed loan pool. Loans which slipped into the NPA category till September 2021 are to be sold to ARC. For the balance pool of stressed loans including foreign currency loans, the bank will take a call later whether to assign them to other ARC or do recovery in-house.

The bank’s loans grew 14 per cent YoY to Rs 1.86 trillion at the end of June 2022 and sequentially they grew by 2.9 per cent over Rs 1.81 trillion in March 2022. The growth in advances is expected to be 15 per cent plus in the current financial year, said Prashant Kumar, managing director and chief executive officer.

Its deposits grew by 18 per cent YoY to Rs 1.93 trillion in June 2022. But sequentially, they declined by two per cent from Rs 1.97 trillion in March 2022.

The share of low cost money – current account and savings account (CASA) improved to 30.8 per cent in June 2022 from 27.4 per cent a year ago. Bank has given guidance of 35 per cent for CASA by the end of March 2023.

The bank had launched a floating rate deposit scheme with repo rate as benchmark during June quarter. The response is mixed and has garnered Rs 300 crore from 14,000 customers till date.

The pace of deposits mobilisation would be higher than growth in advances, says Kumar, adding the credit to deposit ratio will be around 95 per cent in FY23.

The bank’s capital adequacy ratio stood at 17.7 per cent in June 2022 as against 17.9 per cent in June 2021. While current capital level is comfortable, it plans to raise equity capital in the balance part of Fy23, the CEO added.