Release Date: April 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Yes Bank Ltd (BOM:532648, Financial) reported a net profit of INR 1,251 crores for FY24, up by 74.4% YoY.
- The bank achieved a third consecutive year of full-year profitability, marking a significant milestone.
- Net interest income for Q4 FY24 was INR 2,153 crores, up 2.3% YoY and 6.8% sequentially.
- The bank's CASA ratio improved to 30.9% in Q4 FY24 from 29.7% in Q3 FY24.
- Yes Bank Ltd (BOM:532648) has made substantial progress on PSL compliance, reducing the shortfall significantly.
Negative Points
- Net interest margin for FY24 decreased to 2.4% from 2.6% in FY23 due to negative drag from RIDF deposits.
- The cost to income ratio for FY24 was 72.2%, indicating high operational expenses.
- Gross slippages for Q4 FY24 were INR 1,356 crores, up from INR 1,233 crores in Q3 FY24.
- The bank incurred costs amounting to INR 377 crores on the purchase of PSLC certificates in FY24.
- One mid-corporate account slipped into NPA during Q4 FY24, impacting asset quality.
Q & A Highlights
Q: Congrats on the quite good set of numbers. So there are a couple of questions I had. Firstly, with respect to margin. So with the reduction in margin with the help of CASA and improvement in asset quality, we had a stable margin for this quarter. So how it is expected to pan out maybe in FY25, if you can help us understand that, sir?
A: Rakesh, margins for us, we -- as we discussed it in the past as well. There are three drivers for us on driving margins. And I don't want to kind of give a very specific guidance in the very real term but talk about a more two- to three-year journey. One, very emphatically, we've said that there is RIDF balances, which are causing a drag on the margins. And we've also actually given its pro forma number in our presentation to say the current drag on the stock is about 70 basis points on NII to assets. So that's one. So as the balances of RIDF have come down and like Prashant mentioned in his opening remarks, we are fully compliant with the PSL requirement, even at a subcategory level. In fiscal '24, there's a marginal shortfall in the NCF category. But as a consequence, we will now start seeing reductions on a year-on-year basis, and that will start flowing into the margins over the next two to three years. As I said, the total stock hit is about 70 basis points. The second point is what we are also doing is on our assets and especially on the retail asset mix. There is also a calibration towards moving into more ROA accretive products, which also inherently give better yields. So of course, this journey that we are pivoting towards means that the growth that's incrementally coming on this book is coming at a slightly lower rate. You would have seen retail has been growing at about 35%, 40% has kind of now coming to the 20s, and we should possibly see the growth deeper also to the teens. The point is in the process of that, we will, however, see improvement from a margin standpoint. As we speak, the retail disbursement actually are clocking at a yield, which is already 100 basis points more than the stock of the retail portfolio yield. So that is already an indication that on the margin, we are moving into better yielding products. The third is really the focus on getting the cost of funding improved through better CASA, through making sure that you are not just putting rate from the table for accreting deposits. And again, if I just give an example, if you look at the fiscal '24 and if I look at, let's say, the blended savings account rate over the last one year, we would actually not have increased our blended savings account rate despite the backdrop of the tight liquidity and real struggle -- difficulties that the industry has witnessed on savings account. And not only that, on the incremental market share, we've actually done better on savings account and we have numbers till December. We've actually done much more than what our stock market share is. So the focus on deposit and funding is also to make sure that relative to the market, keep improving the rates. So we don't want to just put rate for acquiring deposits. So it's a combination of all these three. There is, of course, we continue to see a reduction in our non-accreting -- non-accruing assets, which is the NPA stock coming down. That will, of course, also add to margins. But just the first two, which is the mix of RIDF coming down, and we do see a trajectory where in the next two to three years, it should be below 5% of our total assets. All -- and the retail assets mix. Both of these, we believe, will add to about 80 to 100 basis points of margin for the next three-year period.
Q: Great. Sir, just to understand the CASA progression in this quarter. So like if we have to build this number to FY25. So what is the sticky part, what is the one-off part, if you can help us get some clarity?
A: So Rakesh, what happens is we will -- we do see some transient flows that to happen in March. And to be honest, it is not peculiar to only this market, it's peculiar to almost every year-end that go through because there are also businesses who like to maintain cash for their year-end transaction. They also demonstrate a good amount of sales that kind of come through. This year was also a little bit peculiar because, there were also holidays, there's weekend that kind of coincided some of our fintech partners also end up keeping certain balances on -- in excess to make sure that there is absolutely seamless flow of transactions. So look, I mean, you could possibly look at, let's say, a 5% adjustment to the number. But to be honest, as I said, the peculiarity of the CA balances to continue mostly all year end.
Q: I have two questions on first, on recovery sir, so last year, we had set out a target of INR5,000 crores and we very well achieved that. In your assessment, how should one look at recovery quantum for FY25?
A: So Jai, this year we have done the recoveries and upgradation to almost like INR6,000 crores. And we are quite confident that FY25 also, we will see similar trend but definitely more than INR5,000 crores.
Q: Great, sir. So sir, just to understand, so hypothetically let's say, we achieved INR6,000 crores of recovery. If I look at our current net NPA plus unprovided security receipts, that is like 1.1%. So that would mean that the excess of that would flow into negative provision. So you may have a negative provision for full year '25, is that the right understanding?
A: Absolutely, right. You can see the current net NPA net carrying value of SR is 1.1%. And when we are talking about recoveries, the first thing the recoveries also improve the upgradation. But in terms of recoveries and the right base of provision would be definitely there. The credit cost will also take into account slippages that we will have for next year and the consequent provisioning of that. Like we mentioned, we do believe that every time we get recoveries and recoveries well in excess, we keep strengthening the balance sheet. So in terms of our prioritization, we will make sure that our SR book is completely off. So currently, our -- the carrying value of our SR book is about 50 basis points. The reduction that will come through in fiscal '25, will make sure that, that balance becomes zero by the end of fiscal '25. That's the first priority. The second is that the NNPA that we have in our book, which is currently at 60 basis points, adjusted for the slippages that we will have next year,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
