Yes Bank Share Price Soars 5% as Net Profit Surges 47% in Strong Quarterly Results

On July 22, Yes Bank shares soared by 5%, spurred by the lender's strong earnings for the April-June quarter of FY25. The private bank posted a 46.7% year-on-year (Y-o-Y) profit increase, reaching ₹502 crore in Q1FY25, up from ₹343 crore in Q1FY24. This rise in profit was largely due to a substantial increase in net interest income (NII) and a significant drop in provisions.

At 10:59 am IST, YES Bank share price were trading 2.58% higher at ₹25.42 per share, while the BSE Sensex was up 0.16% at 80,730.01. The stock's rise was fueled by the strong June quarter results (Q1FY25).

The bank's profit increased by 11.2% from ₹452 crore in Q4FY24. YES Bank's NII increased by 12.2% to ₹2,244 crore in Q1FY25, compared to ₹2,000 crore in the same quarter the previous year (Q1FY24). Sequentially, NII grew by 4.2% from ₹2,153 crore in Q4FY24.

The increase in net profit was driven by a 40% Y-o-Y reduction in provisions, which fell to ₹211.80 crore, attributed to the release of provisions from the security receipts portfolio with a high provision coverage ratio. Kotak Institutional Equities noted that "write-back in investment depreciation, mostly related to resolutions in loans sold earlier, helped lower provisions."

Additionally, the bank's slippages dropped to 2.1% in Q1FY25, the lowest in nearly eight quarters.

In the reported quarter, the bank's gross non-performing assets ratio remained at 1.7% as of June 30, unchanged from the previous quarter but down from 2% a year ago. The net NPA ratio for the quarter decreased to 0.5% as of June 30, from 0.6% in the last quarter and 1.0% in the same period last year.

Furthermore, loan growth was 15% Y-o-Y, while deposits increased by about 20% in the reviewed quarter. Despite the solid quarterly performance, Kotak Institutional Equities retained its 'sell' rating on the stock with a target price of ₹19, implying a 23% downside from current levels.

The brokerage's cautious stance is due to an unfavorable risk-reward profile and concerns about a slowdown in Return on Equity (RoE) improvement. Although the brokerage acknowledges the bank's lower credit costs, it emphasized that YES Bank's re-rating hinges on a significant improvement in RoE driven by sharp NIM expansion, which seems unlikely in the medium term.

“The Bank has started the financial year on a strong footing with RoA sustaining Q-o-Q at 0.5% despite the seasonality of Q1 and no PSL shortfalls. While income engines continue to fire with normalized net income growth at 15% Y-o-Y, the Bank has managed to contain operating cost growth at 8.0% Y-o-Y (excluding PSLCs). Additionally, the strong resolution momentum has led to lower net credit costs, aiding RoA expansion,” said Prashant Kumar, managing director & CEO of YES Bank.

On the balance sheet front, Kumar believes the bank is effectively executing its strategic objectives, maintaining momentum in SME and mid-corporate segments, resuming growth in the corporate segment, and calibrating retail assets with a focus on profitability. Retail and branch banking-led deposits continue to grow faster than wholesale deposits, he added.

“Other key highlights of the quarter were the exercise of outstanding warrants by private equity investors and a credit rating outlook upgrade by Moody’s and ICRA. These external validations reinforce faith and confidence in the franchise's growth and profitability expansion trajectory,” Kumar said.