Release Date: April 19, 2025
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 net profit of INR 2,406 crores, marking a 92.3% year-over-year increase, the highest since March 2020.
- The bank's return on assets improved to 0.6% for the full year, with a sequential increase to 0.7% in Q4.
- Net interest margin saw a sequential uptick of 10 basis points in Q4, reaching 2.5%, supported by efforts to contain deposit costs and reduce high-cost borrowings.
- The bank achieved 100% compliance in priority sector lending (PSL), reducing RIDF and other mandated deposits to 8.7% of total assets from 11% in FY24.
- Asset quality improved with gross NPA and net NPA ratios at 1.6% and 0.3%, respectively, the best since March 2020, and a provision coverage ratio increased to 79.7%.
Negative Points
- Despite improvements, the bank's cost-to-income ratio remains high at 71.3%, though it has improved from 74.4% in FY24.
- The bank's net interest income growth of 10.5% over fiscal '24 may not meet investor expectations for higher growth.
- There is pressure on net interest income growth due to a competitive macro environment and tighter liquidity positions.
- The bank's retail segment has experienced increased losses, attributed to higher provisioning to improve the provision coverage ratio.
- The bank's advances and deposits growth was moderate, reflecting a strategy focused on profitable growth rather than aggressive expansion.
Q & A Highlights
Q: What is the projected growth rate for Net Interest Income (NII) and how does Yes Bank plan to compete with peers raising capital for growth opportunities?
A: Prashant Kumar, CEO, stated that the bank's current core capital (CET1) of 13.5% is sufficient for its growth aspirations for the current financial year. The bank targets a loan growth of 12% to 15%, depending on market opportunities. Despite competitive pressures, Yes Bank believes its NII growth is reasonable and expects improvement as retail loan growth increases.
Q: How does Yes Bank plan to manage its Net Interest Margin (NIM) in a rate cut environment?
A: Prashant Kumar, CEO, explained that the bank plans to reduce deposit costs and increase retail asset growth to improve yields. The bank aims to reduce RIDF balances from 8.7% to below 5% over the next eight quarters. Niranjan Banodkar, CFO, added that the bank will focus on protecting loan spreads and improving CASA mix to mitigate NIM pressure.
Q: What is the outlook for asset quality, especially in light of global economic changes?
A: Prashant Kumar, CEO, noted that Yes Bank is not currently seeing any significant weaknesses in its portfolio. The bank is observing improvements in retail credit costs and good behavior from SME and mid-market customers. However, the bank remains cautious and continues to monitor global developments closely.
Q: Can you provide details on the recent restructuring within Yes Bank's retail and wholesale divisions?
A: Prashant Kumar, CEO, explained that the restructuring was part of a strategic consolidation to enhance customer solutions and business efficiency. Retail liabilities were integrated into branch banking, and SME business was aligned with mid-market operations. This restructuring aims to support the bank's long-term business strategy.
Q: What are the key drivers for Yes Bank's profitability and growth over the next five years?
A: Niranjan Banodkar, CFO, highlighted that the bank aims to achieve an ROA of over 1% by fiscal '27 and 1.5% by fiscal '29 or '30. Key drivers include expanding NIM from 2.4% to over 3.5%, optimizing cost structures, and maintaining a 12% to 15% growth in advances. The bank also plans to reduce RIDF balances, contributing to asset growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
