Expects to sustain NIM improvement, touch 2500 branches by 2020
Yes Bank conducted concall on 28 January 2016 to discuss financial performance for the quarter ended December 2015 and the prospects of the bank. Rajat Monga, Senior Group President, Financial Markets & CFO addressed the call:
Bank has been setting its based on marginal cost pricing, so the newly announced marginal cost based base rate formula to be implemented from 01 April 2016 would not have any impact on banks margin.
However, the new base rate formula would help bank to set base rate with enhanced retail assets perspective.
Retail and business banking segment are contributing increasingly to the loan book, while its share in loan book is expected to increase to 45% by 2020 from present 32-33%. Bank proposes to improve the share of retail business by 200-300 bps every year.
The earning assets such as commercial vehicle, Loan Against Property etc contribute 60-70% of retail loan book constituting 9.5% of the overall loan book. As per the bank, consumption assets such as personal loans along with home loans would gain share to more than 50% of retail loan book by 2020.
The deposit base of the bank has crossed Rs 1 lakh crore level in Q3FY2016. CASA ratio ratio has continued improving to 26.6% at end December 2015.
Bank proposes to improve the share of CASA deposits ratio by 300-400 bps every year to touch 40% level in 3-4 years.
Despite 1% rate cut on saving bank deposits, bank has posted strong 64% rise in saving deposits. Meanwhile, the saving bank rate cut in last quarter contributed to further margin improvement of 5-6 bps in Q3FY2016.
Retail deposits of the bank have increased strongly to 54% of total deposits at end December 2015 from 45% a year ago.
Saving account customer base of the bank stood at 1.2 million, which is rising 15-20% on qoq basis.
Bank has recorded healthy 20 bps yoy improvement in NIMs to 3.4% in Q3FY2016. Bank expect to continue improving margins with focusing on consistently raising CASA deposits and retails loans share.
The credit cost for bank stood at 14 bps (annualised 57 bps) for Q3 and 45 bps for 9MFY2016. Bank expects credit cost to remain below 50 bps for FY2016 against earlier guidance of 50-70 bps.
The contingent provisions of the bank stood at 40 bps, which are down from peak of 50 bps mainly on account of strong loan growth.
Bank has not conducted any fresh restructuring of advances in Q3FY2016, while bank witnessed some recovery in restructured advance book. However, the restructured advance book was stable at 67 bps at end December 2015.
As per the bank, 12 out of 15 accounts in the restructured advance book are showing improvement and returning to normalcy.
Of the Total Restructured Advances of 0.67%, 0.34% is on account of delay in project completion in roads (3 accounts), which the Bank expects will achieve project closure over the next 9 months given accelerated de-stressing of the road sector. Of the balance portfolio, the restructuring packages have been performing in line with expectations, and the Bank, does not anticipate any material slippages in this book.
Bank did not conducted any asset sale to asset reconstruction companies (ARCs) in Q3 as well as for last five quarters.
SRs net of provision stands at Rs 212.4 crore (0.25% of Advances, comprising 10 borrowers). Bank is expecting recovery of about 35% of SRs over next two quarters.
Bank has not refinanced any loan through 5-25 route and has not participated in any SDR since the introduction of these schemes.
Fresh slippages of advances stood at Rs 288 crore, while recoveries at Rs 90 crore in Q3FY2016. The write-offs were at Rs 129 crore in Q3FY2016.
About 75% of the loan book of the bank is A category or better rates. Meanwhile, the investment book also well rated except one investment of about Rs 50 crore which below investment grade but closer to redemption.
Sector wise NPAs were contributed by sector such as roads, EPC, cement, real estate, engineering and textiles.
As per the bank, it has dealt with about 75% of the NPAs identified by RBI in their observations. The remaining stressed asset of 25% would be dealt with in Q4FY2016. Also, the provisions made in Q3FY2016 is much higher than RBI requirements.
The headcount of the bank increased to 13477 at end December 2015, with an addition of 777 employees in Q3FY2016. Bank has deployed about 75% of its staff in retail business.
Banks branch network stood at 750 branches at end December 2015, with an addition of 50 branches in Q3FY2016. Banks proposes to improve branch network to 2500 branches by 2020.
The liquidity coverage Ratio (LCR) was healthy at 88% at end December 2015.
The bank is expecting loan-deposit growth of mid-20’s for FY2017.