Yes Bank Q2 net profit jumps 147% to ₹566.59 crore on lower provisioning; eyes MFI buy

The city-headquartered lender had reported a net profit of ₹228.64 crore in the year-ago period, while the same in the preceding June quarter stood at ₹516 crore.

The core net interest income increased 14.3% to ₹2,200 crore for the reporting quarter on the back of a 12.4% growth in overall advances and the net interest margin inching up to 2.4%.

The non-interest income grew 16.3% to ₹1,407 crore during the quarter. The overall deposits came at 18%, bucking an industry-wide trend of it falling short of credit growth.

The bank is targeting a 17-18% deposit growth and 13-14% in advances in FY25, its chief executive and managing director Prashant Kumar said.

A senior bank official said there is a 0.70% drag on the NIM because of its balances in the rural infrastructure development fund (RIDF), but the outlook on NIM is "positive" because it has not had any shortfall on the priority sector lending front in the first half of FY25, and gradually the RIDF balances will go down.

From a loan growth perspective, the bank grew its corporate loans by over 21% on the back of demand from the mid-corporate segment, but the retail loans were flat.

A senior official explained to reporters that the lack of enthusiasm to grow in the retail segment is due to market-wide issues where it started seeing stress a few quarters back, and also a bias at the bank's end to chase loan growth opportunities more accretive from a return on assets perspective.

The gross non-performing assets ratio improved to 1.6% against 2% a year ago. The overall provisions excluding tax were down 40% at ₹297 crore and helped the overall profits.

The bank witnessed fresh slippages of ₹1,314 crore during the quarter, of which ₹1,179 crore came from the retail assets. Up to 40% of the stress in retail asset setbacks was on account of the unsecured loans, where the industry has been facing challenges.

The senior official said the slippages on the unsecured front seem to have hit peak levels and will stay flat for the remainder of the year before beginning a southward journey.

The bank is not aggressively increasing its unsecured retail book, he said, adding that there is no upsurge in bounce rates, and the collections are also strong at present.

Interestingly, at a time when a majority of the industry is struggling with their microfinance exposures, the bank continues to chase acquisitions in the space, Yes Bank MD and CEO Prashant Kumar said, explaining that it is a good business to be in which may be going through cyclical stress.

"Maybe this is the right time (to acquire)," the chief executive told reporters, adding that the bank wants to buy a "good" microfinance lender.

Kumar said the bank added over 1,000 people during the quarter to take its overall employee strength to over 29,000, and the same has been done to increase its collection efficiencies and also increase presence in branches to book more deposits.

The bank opened 18 branches in H1 FY25 and will open a similar number in H2 FY25, he said, adding that it will be a significantly higher number in FY26.

Kumar said the banking industry is facing challenges in co-lending arrangements because of issues in IT integration and credit underwriting processes.

He declined to comment on reports about a Japanese lender being interested in buying a stake in the lender.

The bank's overall capital adequacy stood at 16.1%, with the core buffer at 13.2%.