Yes Bank Q2 profit surges 74% on lower provisions but net interest income drops

Private-sector lender Yes Bank reported a 74% surge in net profit for the second quarter as provisions for possible loan losses dropped and asset quality slightly improved.

However, the bank’s shares fell as much as 3.9% likely because net interest income decreased.

Net profit for the July-September quarter came in at Rs 225 crore, up from Rs 129 crore a year earlier. Profit was 9.5% higher than Rs 207 crore in the April-June period.

Analysts had widely differed on the bank’s profit projections. While Elara Capital had estimated a profit of Rs 257 crore, Nirmal Bang Institutional Equities had forecast a loss. The average of estimates from analysts polled by Bloomberg was for a profit of Rs 119.3 crore.

The bank’s net interest income dropped 23% to Rs 1,512 crore from Rs 1,973 crore a year earlier. NII was up 8% sequentially from Rs 1,402 crore in the April-June period.

The lender’s shares fell after the results were announced. The shares were down 4.1% at Rs 13.73 apiece in late afternoon trade.

Yes Bank Q2: Other highlights

1) Net interest margin for Q2 was 2.2% compared with 2.1% last quarter.

2) Non-interest income for Q2 climbs 30% to Rs 778 crore.

3) Operating profit falls 46% year-on-year to Rs 678 crore.

4) Net advances at Rs 172,839 crore, up 3.5% from a year earlier and 5.6% sequentially.

5) Total deposits at Rs 176,672 crore, up 30% from a year earlier and 8% sequentially.

6) Gross NPA ratio falls to 15.0% versus 16.9% a year earlier and 15.6% last quarter

7) Net NPA ratio falls to 5.5% versus 5.8% last quarter but rises from 4.7% a year earlier.

8) Provisions decline 65% to Rs 377 crore from Rs 1,078 crore a year earlier.

Yes Bank operating performance

The bank said its core operating profit rose 38% sequentially thanks to wider net interest margins and continued traction in retail and transaction banking fees.

The bank, which was rescued by the Reserve Bank of India last year, made prudent provisioning of Rs 336 crore on a single telecom exposure. It also said that its resolution momentum continues with Rs 987 crore of cash recoveries and Rs 969 crore of upgrades in the second quarter.

The granularity of its loan book is improving, too. Retail loans now account for 54% of its book while corporate loans make up 46%. Its CASA ratio, which indicates the proportion of current and saving accounts, rose 200 basis points sequentially to 29.4%.