Yes Bank has managed to build liability franchise, cut slippages by 50% in Q3: Prashant Kumar

“For the first time, our cost of deposit has come down below 5%, at 4.9%. CASA deposit has grown by almost 47% and our CASA ratio has improved to 30% now. Along with this, there has been an improvement on the liability franchise,” says Prashant Kumar, MD & CEO, Yes Bank.

How would you evaluate Q3 for Yes Bank, considering what the bank has gone through since 2018?
The quarter has been extremely good in the sense that we have been able to build up our liability franchise while continuously reducing the cost of deposits. For the first time, our cost of deposit has come down below 5%, at 4.9%. CASA deposit has grown by almost 47% and our CASA ratio has improved to 30% now. Along with this, there has been an improvement on the liability franchise. We are also seeing very good growth on the loan side.

So, on the retail side, we have disbursed more than Rs 9,000 crore and similarly on the MSME side, another Rs 4,500. On the corporate side also, we have disbursed almost Rs 4,500 crore. So overall Rs 18,000 crore of loan disbursement has been extremely good. On the business side, we have been able to make good recoveries both in terms of cash recovery as well as up gradation and the best part is that our slippage has come down by 50%. So slippage during the current quarter is something around Rs 900 crore plus as compared to Rs 1,800 crore last quarter. Overall, the quarter has been extremely good in terms of both business growth as well as better recoveries and the control on the slippage.

Non-interest income and NII both have fallen on YoY basis. What is your assessment?
NII is not comparable because last year as a result of the order from the Honourable Supreme Court, the entire NPA pool was recognised only in Q4. So till the third quarter, we were booking interest income on the entire thing and in Q4, there was a slippage of Rs 12,000 crore, which actually spanned the entire year, though it was booked only in the fourth quarter. When we end the financial year, then the whole FY22 would be comparable with FY21. The current figure for Q3 is actually not comparable.

On the non-interest income, last year, we had a treasury gain of around Rs 450 crore which is definitely not there in the interest rate rising scenario. If you take that part out, there has been a growth on non-interest income. So on both NII and the non-interest income, we are seeing a good traction and when the year ends, there would be comparable figures on NII.

What about the net interest margin? Over the last four quarters, we have seen a trend of improvement from 1.6% to 2.4%. Where is this headed? Is it going back to over 3%?
This is exactly like we were stabilising the bank over a period of time and after taking care of the legacy issues, now we are in a growth phase. That can be seen in the continuous improvement of NIM. In this quarter, there was an improvement of 25 bps and we would continue to see this momentum in future also. so we are expecting that the year end would be something around 2.65% but next year our NIMs would be 3% plus on the trajectory. Similarly, the other ratios are also continuously improving.

The bank has taken care of the legacy issues. We are in the growth phase and this is a journey now where we would be continuously improving all our performance parameters.

This quarter the GNPAs, the provisioning slippages have all improved. What is the trajectory going forward as far as asset quality is concerned?
There has been a recovery of more than Rs 5,000 crore in the last financial year and this year also we would be seeing a similar kind of recovery. But at the same time, we are in the process of setting up an ARC and we are proposing to transfer the entire NPA pool in one of the ARCs. The moment that happens in FY23, bank would be almost at a nil NPA.

How would you evaluate growth on both sides of the balance sheet for Yes Bank? How is the granularisation coming along?
On the deposit side, we are seeing a growth of around 25% plus and this momentum would continue during the current quarter and with higher focus on the CASA deposits. Especially on the current account, we are seeing a very good correction which would also help us in reducing our cost of deposits and expanding the mix.

On the loan side retail, we are growing at 25% plus and that would continue, on the MSME we are seeing a growth of around say 12% so far and we would be expecting the year to end with around 15% growth. In the mid market segment, we have seen a growth of 40% and this momentum would continue.

On the large corporate side, so far we have seen a reduction in negative growth of around 15%. We are expecting this to stabilise in the current quarter. Overall we would be in a position to grow around 10% on YoY basis by the year end. On the granularity, retail and MSME have now gone to 57%. When we started the journey, it was only 44% in March 2020.

Also, in the corporate side, our focus is on the mid market. With this strategy, the granularisation on the loan as well as on the deposit is seeing very good progress. In fact, even on deposits, the contribution of the retail deposit has gone up to 61%.