The Hindu Business Line : YES Bank net rises 51%

Coimbatore, July 31 A month after increasing its PLR by 50 basis points to 16.5 per cent, YES Bank has taken the cue from the recent rate hike by the Reserve Bank of India to effect yet another hike of 50 bps from August 1. The PLR would now increase to 17 per cent.

The bank has also proposed to increase the fixed deposit interest rate across varying tenors. Deposits maturing between 12 and 18 months would earn 25 bps more than the existing 9.75 per cent, and the rate of return for senior citizens has been revised to 10.5 per cent from August 1.

Profit after tax increased 51 per cent to Rs 54.3 crore during the first quarter of the current fiscal compared to Rs 36 crore during the corresponding quarter of the earlier fiscal.

Its total income rose by 39.5 per cent to Rs 486.2 crore (Rs 348.5 crore). Operating profit was up 50.3 per cent to Rs 91.4 crore (60.8 crore). Its total advances grew by 45.3 per cent to Rs 10,052 crore (Rs 6,917 crore) and deposits to Rs 12,552 crore (Rs 8,640 crore) as at end June 2008.

More challenging

Commenting on the performance, its CFO and President (Financial Markets), Mr Rajat Monga admitted to the general business environment getting tougher than what it used to be a year ago. ‘Shocks from interest rate, inflation, currency volatility etc., have been a challenge for banks. the bank as a whole has managed to maintain its income and growth objective given in the challenging market environment’, he told Business Line over phone.

Asked to reason the increase in its operating expense to Rs 93.1 crore (Rs 67.6 crore), Mr Monga said the bank achieved a 50-per cent growth in business year-on-year. ‘The number of branches has more than doubled from 40 as at end-June last year to 101 as at end-July this year. We have strengthened our team size and general infrastructure. Costs are becoming productive; cost efficiency has improved.’

The bank has raised Rs 364 crore in a combination of perpetual tier I and Upper tier II capital towards end-June to fund its expansion plans.

According to Mr Monga, this would help add solvency to the bank’s business. Credit demand, he said appeared robust, because the systemic forces were driving credit higher. ‘If risks are managed well, then banks would be able to manage in any tight environment,’ he added

The bank is also looking at complementary initiatives that would augur well with its banking environment such as asset management company, asset reconstruction company (for which it has the approval of the banking regulator), electronic banking and private equity product among others.

“We are in the process of setting up a private equity fund. Fund raising is round the corner. At the first opportunity, we will address and demonstrate our ability. We are looking at a foreign partner,” he said and hinted at having identified a partner.

To a query, he said ‘we are not doing retail/consumer lending, because it is vulnerable to asset-price correction and interest rate shocks. The opportunity, however, appears to be closer at hand now. But we will look at parts that will complement our business such as mortgages and credit cards. These are more suited to our proposition.’

Replying to another question, he said ‘we will look at lending to retail customers for carrying on their business. We have already started to give loans for business purpose in a limited way.’

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