More Stories

Informist, Thursday, Oct. 17, 2024

 

By Richard Fargose

 

MUMBAI – YES Bank's net profit in the quarter ended September is seen more than doubling to INR 4.91 billion from a year ago on the back of steady loan growth and a sharp fall in provisions, according to an average of estimates from four brokerages.

 

The bank had reported a modest net profit of INR 2.25 billion a year ago due to high provisions for non-performing assets. On a sequential basis, the bank's bottom line is seen largely flat from 5.03 billion.

 

The estimates for YES Bank's net profit ranged from INR 4.44 billion to INR 5.50 billion in Jul-Sept. The bank will announce its earnings for Jul-Sept on Oct 26.

 

Kotak Institutional Equities expects the private sector bank's provisions for non-performing assets to nearly halve to INR 2.35 billion in Jul-Sept from INR 5.00 billion in the corresponding quarter a year ago.

 

According to provisional data, YES Bank's loans and advances increased 13.1% on year to INR 2.37 trillion and deposits grew 18.3% on year to INR 2.77 trillion as of Sept. 30. The bank's deposits rose 4.6% in Jul-Sept.

 

The private bank's net interest income is projected to rise 16.7% from a year ago to INR 22.46 billion, according to the average of estimates. Sequentially, the net interest income is seen almost flat. The estimates on net interest income for the quarter range from INR 21.29 billion to INR 23.11 billion.

 

"We expect relatively stable NII (net interest income) growth, led by industry average loan growth," Kotak Institutional Equities said. "The bank is a bit more cautious in select segments of the retail portfolio."

 

Brokerages said most banks have raised their deposit rates amid rising competition and are increasingly relying on relatively expensive sources such as bulk term deposits and certificates of deposit to fund asset growth, which is likely to hurt net interest margins.

 

YES Bank has raised its bulk deposit rates by 5-10 basis points during the quarter under review, data compiled by Cogencis showed.

 

Kotak Institutional Equities sees YES Bank’s net interest margin at 2.3% in Jul-Sept, down 10 basis points from a quarter ago, while Nomura Equity Research has pegged it to moderate by 5 bps during the quarter. The bank's net interest margin in Apr-Jun was steady on quarter at 2.4%.

  

Kotak Institutional Equities sees steady traction on recovery and upgrades in Jul-Sept, mostly due to changes in the value of security receipts. Recoveries and upgrades for the Apr-Jun quarter were INR 15.81 billion. YES Bank received INR 840 million from a single trust in the security receipts portfolio related to the sale of non-performing assets to JC Flowers Asset Reconstruction Co. The bank had in December 2022 sold its non-performing asset portfolio worth up to INR 480 billion to JC Flowers.

 

The bank's gross non-performing assets ratio was 1.7% as on Jun. 30, unchanged from a quarter ago. The net NPA ratio was 0.5% as on Jun. 30, down 10 bps from a quarter earlier.

 

Investors will look for management's comments on growth and a return to normalised levels of business operations. The bank’s Managing Director and Chief Executive Officer Prashant Kumar told Informist in May that with legacy issues mostly addressed, bringing profitability on a par with peers was the only unfinished agenda now.  According to YES Bank’s investor presentation, the bank’s operating profit margin was 0.9% in 2023-24, compared with 2.6-3.1% for other large and mid-sized private banks.

 

Investors will await the bank management's comments on likely stake sale by existing investors. State Bank of India, which holds a 23.98% stake in YES Bank, is looking to pare its holding in the bank, the Economic Times reported. The three-year lock-in period that prevents investors from selling shares of YES Bank expired last year. SBI had bought the stake in YES Bank as part of a government-initiated bailout of the private bank in 2020.

 

Following are the Jul-Sept Jun earnings estimates of YES Bank based on reports compiled by Informist from four brokerage houses:

 

Brokerage firm	NII (in INR million)	Net Profit(in INR million)
Anand Rathi Share and Stock Brokers Ltd.	22,856	4,607
Emkay Global Financial Services Ltd.	23,109	5,087
Kotak Institutional Equities	21,288	4,437
Nomura Equity Research	22,600	5,500
Average	22,463	4,908

 

At 1520 IST, shares of YES Bank were trading at INR 20.90 on the National Stock Exchange, down 1.2% from the previous close. End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.