Analyst Concall
YES Bk to cut savings acct rates; cost of deposits may fall
This story was originally published at 18:55 IST on 19 April 2025
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--YES Bank: Current capital sufficient for growth aspirations in FY26
--CONTEXT: Comments by YES Bank mgmt in analyst call post Jan-Mar earnings
--YES Bank: NII growth will pick up once retail loans pick up
--YES Bank: Will remain cautious on lending to microfinance sector
--YES Bank: Will not dilute stake in YES Securities
--YES Bank: Share of retail, SME loans to be retained at 60% of total loans
--YES Bank: Cut interest rates on savings account effective Monday
--YES Bank: New rates on savings account of INR 1 mln or less to be 3%
--YES Bank: New rates on savings acct of INR 1 mln-INR 2.5 mln to be 3.5%
--YES Bank: New rates on savings account of INR 2.5 mln-INR 5 mln to be 4%
--YES Bank: New rates on savings account of INR 5 mln or more to be 5%
--YES Bank: Cut in saving acct rates to reduce deposit cost by 20 bps
MUMBAI – YES Bank will cut interest rates on savings accounts across brackets starting Monday, which would lead to a 20-basis-point fall in cost of deposits, the bank's management said in a post-earnings analyst conference call Saturday. The bank's cost of deposits was 6.1% as of Mar. 31.
YES Bank will announce the revised interest rates on Monday, Managing Director and Chief Executive Officer Prashant Kumar said. An interest rate of 3% would apply to accounts of INR 1 million or less, 3.5% on INR 1 million to INR 2.5 million, and 4% on accounts of INR 2.5 million to INR 5 million. An interest rate of 5% will be applicable on accounts of INR 5 million or more, he said.
The management said that the cut in the savings account rates was to avoid compression in the bank's margins. While the fall in loan rates would be faster, repricing of term deposit rates would be at a slight lag, they said. Floating rate loans made up two-thirds of the bank's total loan book. Of the floating rate book, 6% of loans were linked to the marginal cost of funds based lending rate. A bulk of the floating rate loans were linked to repo, and some were linked to Treasury bill rates, the bank officials said.
YES Bank's bottom line rose 63.3% on year to INR 7.4 billion in Jan-Mar, earnings released earlier in the day showed.
In terms of further growth, Kumar said the bank's core capital is 13.5%, which would be sufficient for its growth aspirations in 2025-26 (Apr-Mar). The bank has a loan book target of INR 3.0 trillion to INR 3.5 trillion and aims for a loan growth of 12-15% in the next one to two years, he said.
The bank is focussing on the retail segment to boost its net interest income, its management said. "We are going to see a reasonable growth in our retail assets which gives a better yield on the asset side and we would like to keep that proportion of retail and SME (small and medium enterprise assets) at around 60%," the bank's management said. The retail assets give a better yield than corporate assets, they said.
This quarter, the bank faced losses in the retail segment due to increase in provisioning by around INR 3 billion. The bank's provisioning coverage ratio rose to 79.7% from 71% a quarter ago. However, the losses in the retail segment "have peaked" and are not seen increasing in the future.
In the previous quarters, the bank wanted to venture into the microfinance segment. However, due to the recent disruption in this sector, the bank is keeping a close watch on this industry. If the bank finds a good opportunity for growth in the microfinance sector, it would examine it, the bank's officials said. YES Bank is more selective when lending in this sector and has taken a "cautious approach for financing".
The bank's management said it was not looking to cut its stake in brokerage firm YES Securities. The bank expects to achieve a return on assets of 1% by FY27 and 1.5% by FY29-FY30. On Thursday, shares of YES Bank closed 1.23% higher at INR 18.09 on the National Stock Exchange. End
Reported by Cassandra Carvalho and Kabir Sharma
Edited by Ashish Shirke
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