YES Bank continues its steady run

Much to investors’ relief, YES Bank did not throw up any nasty surprises on the asset quality front, while declaring its December quarter results on Friday. This is no doubt welcome after the sudden spike in bad loans witnessed by its peers such as Axis Bank and ICICI Bank during the quarter.

YES Bank’s gross non-performing assets (NPAs) as a per cent of loans remained steady at 0.66 per cent. The bank posted a strong 25 per cent growth in net profit during the December quarter, on the back of 26.7 per cent growth in loans.

The RBI asking banks to recognise certain loans as NPAs, as part of its review of stressed accounts, has kept investors on tenterhooks, not knowing the quantum of impact it will have on each bank.

Both Axis and ICICI saw a sharp rise in bad loans due to the RBI’s directive, which weighed on their earnings. Given YES Bank’s corporate exposure, its asset quality performance during the December quarter was also keenly awaited.

But the bank put to rest such concerns by delivering stable asset quality, reporting no slippages in restructured assets or sale of assets to ARCs.

The bank also did not restructure any account under the 5:25 scheme or undertake any strategic debt restructuring.

The bank’s current restructured book has remained steady at about 0.7 per cent of loans in the December quarter. Of this, 0.34 per cent is on account of delay in project completion in roads (three accounts), which the bank expects will achieve project closure over the next nine months given accelerated de-stressing of the road sector.

The management does not expect any notable slippages in its restructured book. This is also a key positive given that its peers such as ICICI Bank have been witnessing increased slippages from restructured book in recent quarters.

YES Bank is predominantly a corporate lender — this segment constitutes 67 per cent of total loans.

YES Bank’s exposure to the power and electricity segment stood at 9.1 per cent in the December quarter.

Of this, 3.1 per cent pertains to the renewable energy space, where the execution risk is much lower. In the non-renewable space, almost its entire exposure (3.1 per cent) is operational. The bank has no project finance exposure to conventional power projects and state electricity boards (SEBs).

Margins stable The healthy growth in loans led to a strong net interest income growth of 27 per cent during the December quarter. The net interest margin went up to 3.4 per cent from 3.3 per cent in the previous quarter. The bank has been able to improve the share of its low-cost deposits (CASA), which has aided margins.

The bank grew its CASA by 45 per cent in the December quarter. The bank recently (effective November) lowering its interest on savings account from 7 per cent to 6 per cent has also helped margins.

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