Yes Bank Share Price: Yes Bank Successfully Built Liability Deductible, Reduced Slippages by 50% in Q3: Prashant Kumar

“For the first time, our filing cost fell below 5%, to 4.9%. The CASA deposit has increased by nearly 47% and our CASA ratio has improved to 30% now. Along with this, there has been an improvement in the liability deductible,” says Prashant Kumar, CEO and CEO, .

How do you rate Q3 for Yes Bank, given what the bank has been through since 2018?
The quarter was extremely good in that we were able to grow our liability deductible while continuously reducing the cost of deposits. For the first time, our deposit cost fell below 5%, to 4.9%. The CASA deposit has increased by nearly 47% and our CASA ratio has improved to 30% now. Along with this, there has been an improvement in the liability deductible. We are also seeing very good growth on the lending side.

So, on the retail side, we disbursed more than Rs 9,000 crore and similarly on the MSME side, another Rs 4,500. On the corporate side too, we disbursed almost Rs 4,500 crore. So overall Rs 18,000 crore loan disbursement has been extremely good. On the business side, we were able to make good recoveries both in terms of cash recovery and upgradation and the best part is that our slippage was down 50%. Thus, the slippage in the current quarter is around Rs 900 crore more compared to Rs 1,800 crore in the last quarter. Overall, the quarter was extremely good both in terms of business growth and better recoveries and slippage control.

Non-interest income and NII both declined on a year-over-year basis. What is your assessment?
NII is not comparable because last year, following the order of the Honorable Supreme Court, the entire NPA pool was not recognized until the fourth quarter. So until the third quarter we were recognizing interest income on the whole and in the fourth quarter there was a slippage of Rs 12,000 crore, which was actually spread over the whole year, although was only booked in the fourth quarter. At the end of the fiscal year, the whole of fiscal year 22 would be comparable to fiscal year 21. The current figure for the third quarter is actually not comparable.

On non-interest income, last year we had a cash gain of around Rs 450 crore, which is definitely not there in the higher interest rate scenario. If you take that part out, there was growth in non-interest revenue. So both on NII and non-interest income we are seeing good traction and at the end of the year there would be comparable numbers on NII.

What about net interest margin? Over the past four quarters, we have seen an improving trend of 1.6% to 2.4%. Where is it going? Does it go back more than 3%?
It’s exactly like we stabilize the bank over a period of time and after sorting out the inheritance issues, we are now in a growth phase. This can be seen in the continuous improvement of NIM. In this quarter, there was a 25 basis point improvement and we will continue to see this momentum going forward as well. so we expect the end of the year to be around 2.65%, but next year our NIMs would be over 3% on the trajectory. Similarly, the other ratios are also constantly improving.

The bank took care of inheritance issues. We are in the growth phase and it is a journey now where we are continuously improving all of our performance metrics.

This quarter GNPAs, provisioning slippages all improved. What is the trajectory for asset quality?
There was a recovery of over Rs 5,000 crore in the last financial year and this year too we would see a similar type of recovery. But at the same time, we are in the process of setting up an ARC and we propose to transfer the entire NPA pool to one of the ARCs. By the time this happens in FY23, the bank would be almost at zero NPA.

How would you rate the growth on both sides of Yes Bank’s balance sheet? How is granularization going?
On the deposit side, we are seeing growth of around 25%+ and this momentum will continue in the current quarter and with a greater focus on CASA deposits. Especially on the current account, we are seeing a very good correction which would also help us reduce the cost of our deposits and broaden the mix.

On the retail lending side we are growing over 25% and this would continue, on the MSME side we are seeing around 12% growth so far and we expect the year to end with growth of around 15%. In the mid-market segment, we recorded growth of 40% and this momentum will continue.

On the large corporate side, we have so far seen a reduction in negative growth of around 15%. We expect this to stabilize in the current quarter. Overall, we would be able to grow by around 10% on an annual basis by the end of the year. In terms of granularity, retail and MSMEs have now increased to 57%. When we started the journey it was only 44% in March 2020.

Also, on the enterprise side, we focus on the middle market. With this strategy, the granularization of both the loan and the guarantee is progressing very well. Indeed, even on deposits, the contribution of retail deposit rose to 61%.

Richard L. Militello