Last updated: 22 Jan, 2021 | 02:08 pm
Profit beats estimates: Yes Bank has reported a net profit of ₹150.7 crore in Q3Y21, beating street expectations. Analysts had earlier anticipated a loss of about ₹4,815 crore. The bank had reported a loss of Rs18,560 crore in the same quarter last year.
Net interest income rises: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income for Yes Bank grew to ₹2,560 crore, up 29.7% as compared to the previous quarter. Net interest margin grew 30 bps on-quarter to 3.4%.
Asset quality improves: The bank’s Gross NPA ratio stood at 15.36% compared with 16.9% in the July-September quarter. Net NPA ratio reduced 67 bps on-quarter to 4.04%.
Update on moratorium: The RBI had permitted banks to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the RBI in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don’t have to be marked as NPAs, banks have been asked to disclose details of the restructured assets. Yes Bank said that the Gross NPA’s would have been nearly 20% (vs 15.36%). Clarifying on the large difference, Yes Bank CEO said that the loan book has shrunk in the last few quarters. The bank’s loan book declined 9% on-year to Rs1.69 lakh crore as on 31 December.
Provisions: Provisions rose 85% QoQ to Rs 2,198 crore. The bank has also made provisions worth Rs 2,683 crore for Covid-19 related accounts. The bank said that Covid-related provisions that it holds should be enough to cover any losses arising from restructuring. Loans amounting to ₹8,322 crore to a mix of retail, corporate, and small businesses have not been classified as bad loans in line with the apex court order. Of this, debt worth ₹1,264 crore has been restructured.
Deposits: The Bank’s deposits aggregated to approximately ₹1.46 lakh crore as of Dec-20, a growth of around 7.7% on-quarter. Bank’s CASA (current and savings account) deposits now comprise 26% of total deposits of the bank, down from 32% in the last year. CASA capital is the cheapest source of capital for banks. Due to the strong pick up in retail and SME disbursements, the bank’s net advances grew 1.7% quarter-on-quarter.
Fundraising: The bank’s board also voted in favour of raising funds worth Rs 10,000 crore through various routes, including share sale, depository receipts, convertible debentures, and bonds.
The fundraising from various banks in April and the consequent FPO have provided a fresh lease of life to Yes Bank. The bank has witnessed a visible improvement in business conditions.
However, asset quality remains a major concern. The asset quality could deteriorate further, when the stay order from the Supreme Court comes to an end.
Yes Bank had seen upgrades on its debt instruments from Brickworks Ratings and Moody’s as business conditions improved. Global brokerage firm Jefferies said recently that the Piramal group winning creditors' approval to take over DHFL's loans was a 'marginal positive' outcome for Yes Bank. Going forward, the bank looks well poised to continue to show improvement in business metrics, though asset quality remains a concern.