Yes Bank Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Yes Bank Limited (YESBANK) Q3 FY24 Earnings Concall

• Deposit Growth
  • 15% Y-o-Y growth in deposits excluding certificates of deposit.
  • CASA ratio improved to 29.7% from 29.4% last quarter.
  • Branch banking deposits grew 22% Y-o-Y.
• Margin and Advances
  • NIM expanded by 10 bps Q-o-Q to 2.4%, driven by balance sheet management despite flat yields.
  • Sustained growth seen in SME; 24% Y-o-Y and mid-market; 26.4% Y-o-Y.
  • Helps drive core fee income and low cost funds.
  • 30 bps Q-o-Q reduction seen in net NPAs.
  • Net carrying value of SRs also improved to 1.7% of advances.
• Cost of Funds Outlook
  • Bulk of repricing absorbed till September 2022.
  • Minimal impact seen over next 1-2 quarters.
  • Efforts on for deposit mobilization to continue.
• Retail Portfolio Slippages
  • Driven by unsecured assets segment.
  • Measures taken to tighten credit processes and scorecards.
  • Expect slippages to plateau before starting to decline.
• CASA Growth Drivers
  • Focused execution plan for CASA mobilization.
  • Alignment of incentives for customer acquisition and balance retention.
  • Operating at lower CASA ratio currently provides headroom.
• Personal Loans Portfolio
  • Concerns mainly in new to credit and low income segments.
  • Measures taken like tighter credit norms and income thresholds.
  • Expect slippages to plateau before declining going forward.
• Security Receipts Realization
  • Redeemed INR2,500 crores out of INR1,853 crores SRs in one year.
  • Remaining SRs carrying value reduced to 0.8% with 73.2% coverage.
  • Guidance to reduce net NPAs and SRs below 1% in coming quarters.
• PSL Compliance
  • PSL compliance improving but 11% of assets still in lower yielding RIDF.
  • This drags ROA, making 1% target unlikely by FY25; FY26 more realistic.
  • Working on PSL compliance through organic channels and inorganic acquisition.
  • Expect minimal PSL non-compliance by FY24 across subcategories.
• Retail Portfolio
  • Higher retail slippages this quarter, especially in personal loans.
  • Taking corrective actions to plug slippages and normalize delinquency.
  • Seeing recoveries and upgrades helping contain net slippages to 1-1.1%.
  • Retail portfolio growth steady around 13-15%.
• Corporate Portfolio
  • New corporate disbursements being offset by repayments of legacy loans.
  • Legacy loans being consciously reduced, especially in real estate and hospitality.
  • Net degrowth in corporate book as legacy loans repaid.
  • New disbursements focused on working capital and transactional lending.
• ROA Outlook
  • 1% ROA target important but focused on core operating profit delivery.
  • Unlikely to achieve 1% ROA by FY25 due to drags like RIDF.
  • More realistic timeline FY26 based on strategy execution.
  • Priority to reduce drags like SRs while boosting core profitability.
• Market Profit Expectation
  • Focus is on long-term ROA path, not beating quarterly expectations.
  • Communicated 1% ROA target as a 2-3 year journey requiring execution.
  • External factors like interest rates impacted profitability this quarter.
  • Priority is strengthening fundamentals like PCR, not profit beats.
• Security Receipts
  • Gross SRs reduced from INR8,000 cr to INR6,000 cr, 25% decline.
  • But net SRs just 0.8% of advances or INR1,850 cr due to provisions.
  • Once provisions become zero, recoveries will boost profits.
  • SR resolutions already benefiting NII currently.