Yes Bank aims to reduce unsecured retail slippages from the current 44 per cent, 25 per cent is where we would be comfortable at, Managing Director and Chief Executive Officer (CEO) Prashant Kumar stated during the bank’s Q3 FY25 media interaction.
The gross slippages for the December ending quarter stood at INR 1,348 Cr (2.2 per cent of Advances).
We have seen early delinquencies in the 31-90 days overdue loans stabilising across both secured and unsecured products, improvements in underwriting and credit scoring systems over the last 9-12 months have been instrumental in the process.Prashant Kumar, MD & CEO, YES Bank
Recalibrating the Retail PortfolioPrashant Kumar stated that 50 per cent of the retail business is now sourced internally, with a focus on secured products such as home loans, used cars, and construction equipment loans. “This shift aligns with our strategy to focus on less risky products and reduce our exposure to unsecured lending,” he said.
Calibration isn’t just about increasing the bank’s share of postings. It involves ensuring we steer clear of segments or offerings that may not be profitable. We also focus on products that have historically seen delinquencies in the industry, enhancing our collection efforts in those areas, the current efforts are not equivalent to normal rundown repayments.Kumar further explained.
“We are at a breakeven point, that’s why you are not seeing any growth. The moment disbursement will be higher than the normal in which we are hopeful that in the financial year, we will be seeing growth in retail also,” said MD & CEO.Another Yes Bank official further clarified that recalibration isn’t just a phenomenon of this (Q3 FY25) quarter, as if you look at disbursement run rate, we have been slowing them down from over last 12 months or so.
Retail Advances at INR 100,000 Crs (41% of Net Advances), focus shifting towards further improving profitability while maintaining quality, shows the investor presentation of Yes Bank for the December ending quarter of FY25.
On the current advances mix, the strategy remains the same, “The mix between retail and wholesale is 60:40, this to remain the same over the medium term,” he said.
Managing Costs and NIM Expansion
Private Lender has been actively reducing its reliance on low-yield RIDF (Rural Infrastructure Development Fund) deposits, which declined from 11 per cent earlier to 8 per cent of total assets by December 2024.
The bank aims to bring this down further to below 5 per cent over the next three years.
The reduction in RIDF has been achieved by a combination of organic and inorganic efforts. Direct lending to customer, financing Non-Bank Financial Companies (NBFCs), and inorganic growth through Priority Sector Lending Certificates (PSLC) purchases.Prashant Kumar
Kumar highlighted that the declining RIDF balances, along with a steady improvement in CASA deposits, will contribute to the bank’s margin expansion. “We have kept our cost of deposits steady at 6.1 per cent, and as the retail business picks up, we expect margins to improve further,” he said.What do Q3 FY25 earnings say?
Yes Bank reported a net profit of Rs 612 crore for Q3 FY25, marking a 2.6x jump from the Rs 235 crore profit recorded in the same quarter last year. The bank also achieved a 10.6 per cent sequential growth in pre-operating profit, which stood at Rs 1,079 crore.
Kumar emphasised the bank’s focus on building a strong liability franchise. Total deposits grew by 14.6 per cent year-on-year to Rs 2.77 lakh crore, with retail deposits comprising 62.6 per cent of the total. Current Accounts and Savings Account (CASA) balances also witnessed growth, with savings account balances rising by 32 per cent and current account balances increasing by 22.1 per cent year-on-year.
CASA ratio has improved 350 basis points over the last four quarters and CASA will soon start to contribute to our operating margin expansion and profit.said Kumar.
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