YES Bank: 5 takeaways as lender shares biz update at Nuvama India Conference 2024

Nuvama hosted the YES Bank Ltd management on the second day of Nuvama India Conference 2024, where the private bank suggested that any improvement in earnings would be driven by a reduction in the priority sector lending (PSL) shortfall. An improvement in assets is through risk-calibrated mix, increasing non-interest income, and reducing cost-to-income ratio. Here are post-conference notes on the key takeaways by Nuvama:

YES Bank loans

The YES Bank management is focusing on growing the SME and mid-market segment as it is high-quality segment with significantly low NPAs across business cycles and good sources of fee income and low-cost liabilities. The ATS in personal loans was Rs 2.5 lakh, Nuvama suggested. Explaining the high slippage in the retail segment, the management guided that industry-level concerns were seen in NTC customers and customers with income levels less than Rs 30,000. The YES Bank management said it has taken measures to improve these two segments.

YES Bank deposits

YES Bank is working towards delivering deposit growth more than credit growth, Nuvama said. The management said the blended CASA rates have not risen materially from last year, and growth is driven by execution in retail plans and efficiencies at the branch level. Loan-to-Deposit Ratio for Yes Bank stood at 90 per cent, and the management is comfortable maintaining LDR at this level. Nuvama said the management further guided that it would ensure that deposit growth stay higher than advance growth.

YES Bank: Impact of risk weights

The CET1 ratio, which stood at 12.6 per cent for Q3FY24, is seeing an impact of 40 basis points due to an increase in risk weights, which was fully offset by organic CET accretion.

"RWAs were Rs 2.7 lakh crore in Q3FY24, increasing by about Rs 12,600 crore QoQ, of which Rs 7,800 crore was impacted by an RBI circular," Nuvama said.

YES Bank asset quality

YES Bank said retail slippages for Q3FY24 stood at Rs 1,050 crore against Rs 820 crore QoQ, as the unsecured portfolio needed timely corrections and also due to some measures taken by the bank with respect to revising scorecards and tightening the credit process. The YES Bank management guided that the slippages may remain at the prevailing levels for the next one–two quarters, but would decrease thereon. AIF-related provisions have been fully absorbed, it said.

YES Bank profitability

With the current plans and strategies, the management expects return on asset (RoA) would reach 1 per cent by FY26. The management aspires to achieve this via improvement in core operations and not just the profit number, as they want to maintain healthy NNPA/SR level, Nuvama said.