Yes Bank has posted good quarter from last few years.
Only thing people were interested is their NPA numbers and YES bank has posted reduction in GNPA and net NPA this will be positive for the market…
Sir, I recall the demon qtr also had a growth in profits YOY. Just to check I went on the BSE site to the result posted on 19 Jan 2017:
BTW, there is no mention of divergence in today’s filing. Does that mean Yes Bank and RBI’s assessments have converged?
GNPA and Net NPA declared by Yes bank has never been a problem. The problem is the divergence from the RBI posted NPA numbers for the bank. Going by the low NPA numbers disclosed by the bank, we have to take it with a pinch of salt till the RBI numbers are disclosed.
As per result slides, loans from the ones classified as standard in previous quarter have been recovered and there has been no delay or issue with recovery. Does this indicate that the RBI classification of NPA was incorrect and bank was more accurate in marking them as standard and not NPA?
Tho whole divergence saga was a false alarm if that is the case!
Jeevan
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At this stage of the economic cycle, growth in advances is more important than asset quality.
Asset quality is important when GDP growth is slowing down as that’s when NPAs begin to rise and its not clear how bad its going to get. Now that GDP growth is picking up, worst of the NPA is behind us. Even PSU banks are reporting decent numbers. Asset quality will improve from here. There may be some book entries regarding recognition and divergences but situation on the ground will improve.
So the key moniterable is how the bank is participating in the up-cycle. At 46% jump in advances, Yes is ahead of the curve and with recent 5000 Cr QIP, it has enough ammunition to stay ahead.
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FY 18 Q3 Concall Highlights (source: capital market):
- The bank has achieved two important milestones during the quarter ended December 2017. The Balance Sheet of the bank has crossed Rs 2.5 Lakh crore and advances book has crossed Rs 1.5 Lakh crore level end December 2017.
- The total capital funds of the banks have surged 62% to Rs 43596 crore end December 2017 over December 2016. Capital adequacy ratio was strong at 19.5%, with Tier I at 14.7% and CET I at 10.7% end December 2017.
- The bank has posted strong 47% surge in advances to Rs 171515 crore, on the back of robust growth in both Corporate and Retail businesses, while showing consistent improvement in granularity of the loan book.
- Retail banking advances doubled (recording growth of 102%) in last one year, while gaining share to 32.3% combined with MSME from 31.1% a year ago. Retail banking advances share has improved to 11.8% of advances up from 8.6% end December 2016.
- The share of corporate banking loan stood at 67.7% and Retail & Business Banking (non-corporate) loans at 32.3%. The bank aims to improve the share of non-corporate loans to 40% by FY2020.
- The overall corporate portfolio continues to be well rated with over 75% portfolio rated A or better and well distributed across growth sectors.
- The bank has exhibited healthy 22% growth in the net profit in the quarter ended December 2017, despite lower treasury income to the extent of Rs 100 crore.
- The bank has showed decline in the net interest margin by 20 bps from 3.7% in Q2FY2018 to 3.5% in Q3FY2018, of which 10 bps was contributed by huge capital raising of Rs 9400 crore at the higher cost of 8.5% compared with bank cost of funds of 6%. Another 10 bps decline in margin was served by fresh stressed assets addition and increase in securities receipt book.
- The bank has raised Rs 5400 crore worth of Tier I bonds and Rs 4000 crore worth of Tier II bonds in the quarter ended December 2017.
- The bank is confident of improving margin to 4% mark, well ahead of targeted timing of end FY2020. The rising CASA ratio and enhanced organic priority sector loan generation is expected to support improvement in margins. The bank has raised its MCLR by 10 bps from 01 January 2018.
- CASA ratio further increased to 38.0% at end December 2017 up from 37.2% at end September 2017 and 33.3% at end December 2016. The bank is confident of improving CASA ratio to 40% by September 2018, well ahead of earlier targeted timing of FY2020, while it expects CASA ratio to touch 43-45% by FY2020.
- The bank has improved cost-to-income ratio to 39.5% in Q3FY2018, while maintaining cost-to-income ratio below 40% for second straight quarter. The bank expects further improvement in cost-to-income ratio and touch a level of 36-37% in the near term, with improving productivity and efficiency.
- The bank has improved its branch network to 1050 branches end December 2017, while it is strongly focusing on strengthening of digital banking and would be cautiously adding new branches. The bank expects its employee count to touch 21000 employees by March 2020.
- The bank has exhibited improvement in asset quality in Q3FY18. Credit cost stood at 18 bps for Q3FY18 and 64 bps for 9MFY18.
- Provision coverage ratio improved to 46.4% end December 2017 from 43.3% end September 2017. The bank is confident of further improving provision coverage ratio to 60% by end in June 2018. The bank is hoping for more NPA resolution in Q4FY2018 and Q1FY2019, supporting improvement in provision coverage ratio.
- The exposure to sensitive sector has declined from 9.3% end September 2017 to 7.7% end December 2017. Within the sensitive sectors exposure, the exposure to non- renewable electricity generation sector was flat at 3.4% and iron &steel sector at 2%, while the exposure to telecom sector dipped sharply to 2.3% end December 2017 from 3.9% and September 2017 of which 2.1% is better rated.
- The fresh slippages of loans stood at Rs 494.9 crore, which includes Rs 245.4 crore of slippage from accounts previously classified as SDR, 5/25 and NCLT categories end September 2017. The bank has showed recovery of Rs 228.2 crore and write-offs of Rs 12.7 crore in Q3FY2018.
- With regards to loans identified as part of the RBI’s Risk Based Supervision (RBS) for FY2017, the bank has witnessed repayment of Rs 450 crore in two standard account and recoveries of Rs 129 crore from 1 of 4 NPA account in Q3FY2018.
- The standard restructured advances book of the bank has declined to 0.05% (Rs 90.3 crore) end December 2017 from 0.08% end September 2017. There was no additional restructuring during the quarter.
- Net Security Receipts (SRs) book of the bank has increased to 1.06% of gross advances (Rs 1834.2 crore) end December 2017 from 0.94% end September 2017. The bank has sold one standard loan account of Rs 421.9 crore to asset reconstruction companies (ARCs) in Q3FY2018, contributing to the rise in SRs.
- However, the bank expects redemptions of minimum 30%-40% of its net outstanding Security Receipts portfolio within next 15 months by 31 March 2019.
- Standard SDR outstanding exposure stood at 0.21% (Rs 361.9 crore) end December 2017, while bank has restructured one account (Rs 87.6 crore - 0.05% of advances) under Outside SDR scheme of RBI in Q3FY2018.
- Standard 5/25 refinanced exposure was stable at 0.06% (Rs 112.0 crore) from two accounts. Standard S4A exposure stood at 0.09% (Rs 153.5 crore) end December 2017.
- With regard to 40 accounts referred by RBI to NCLT, the bank has exposure to 9 borrowers of Rs 1342.4 crore, of which standard exposure is Rs 75.2 crore. Bank carries provision of 51% on the aggregate funded exposures of NCLT List 1, and 43% on the aggregate funded exposure of the subsequent NCLT list 2.
- The bank continued with the LCR maintenance at well above 80% regulatory requirement with daily average Liquidity Coverage ratio of 96.3% in Q3FY2018, reflecting a healthy liquidity position.
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Each of these three have some factors better than the other two e.g. advances of Yes are the best but NIMs are the lowest.Which ones out of 6 should get more weightage to draw a conclusion and the reasons thereof? Your GNPA (rise in absolute nos) is not clear.could you give figures for Yes indicating 295% rise in GNPA.
Thanks in advance
I think the interest rates are already going up in the system
Is it a matter of time when RBI raises the rates again?
If the rates raise NBFC’s and banks will under perform i am not wrong?
Just saw historical rate hike by rbi in 2011 to 12 where it raised multiple times to contain inflation
I think that time banks did under perform
Any insights on this theory?
PS Holding 1K shares
Era of consistent increase in Bank Rates:
19 Mar 2010 - 5% till 16 Apr 2012 - 8%
In this period, Nifty - 1%
HDFC Bank - 44%
Indusind - 103%
Kotak - 56%
Yes Bank - 54%
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Era of consistent increase in Bank Rates - II -:
26 Oct 2005 - 6.25% till 30 Jul 2008 - 9%
In this period, Nifty - 80%
HDFC Bank - 79%
Indusind - 17%
Kotak - 223%
Yes Bank - 98%
Though 2008 is a different story.
I do not remember what exactly happened at that time. But a look at my transaction log reveals, I bought more, and in 2 years time it doubled from that price. 
My thought process is, I only have a vote, but no say in how a company runs. So rather than trying to think what they should have done, I listen to what they did. That reveals their attitude and gives me enough clues if I should stick with that company or not.
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All financials are getting beaten up? is this a reason rising yields or some large FLL’s are booking out due to LTCG benefits?
Yes, large FII sell outs - mainly due to global macros (and in line with global weakening of markets) and not necessarily due to LTCG
Really? DOW and other markets had been up yesterday while our NIFTY has fallen today!
In fact SGX NIFTY was up in the morning before market open following the lead of US markets but nevertheless we ended in red!
Not talking about one day market. Its the general market trend over the past 4 weeks across the globe (non-US markets)
CNX500 v/s S&P500
If you see we have massively under performed US in 2018.
Despite rest of the global markets falling the markets in the US have been gaining in the past 2-3 sessions is because the increase in import tariffs augers well for US companies. However this may lead to a trade war globally and as discussed in the article, Europe and other countries might adopt similar strategies in
retaliation. In my opinion this was the
reason for the sharp fall in our markets in last hour. I won’t be surprised if the US market correct in next 1-2 sessions.
Based on the latest news feeds, fear about a trade war is already subsiding.
I am not sure what will happen in future. But fact remains that India has under-performed US and other emerging markets in 2018.
While many people attribute this under-performance to varied causes. I attribute it to two things:
- A great 2017 where almost everything became either fairly valued or over valued
- Very average Q3 numbers
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In a group of hawks, doves, retaliators, bullies and prober-retaliators, when a dove fights a dove, they both make a lot of noise about doing this and that to the other knowing fully well that they will do damage to themselves in the process if they proceed and so the fight goes nowhere and ends without damage to anyone. When a hawk fights a dove, hawk wins and the dove loses but with minimal damage as it knows when to back-off. When a hawk fights a hawk, its blood until last-man standing.
When fights follow round after round in multiple iterations, one can have a memory of past actions and act accordingly. A retaliator will attack only if attacked. A prober-retaliator will start an offensive to test the waters and retaliate if there is retaliation or keep bullying. A bully will act like a hawk and when it meets a dove, will win always but when it meets another hawk, will run away.
With that background, Trump tries tariff on Steel and Aluminium imports. EU retaliates with tariff on Harleys, Levis and Bourbon and hits where it hurts - the American heartland. Now if the US and EU are both hawks, this could go on forever and could end up derailing international trade and globalisation but trade isn’t a zero-sum game and globalisation can be win-win (non zero-sum) which is why it has been successful so hawk-hawk strategy is improbable.
Now if Trump were a prober-retaliator and the EU retaliator, it would again be a similar to a hawk-hawk strategy leading to complete demolition. If Trump were the bully (most likely) and has met a hawk in the EU, in all probability, Trump will run away i.e reverse his stand. However, considering this is politics, this is in all likelihood a dove-dove fight with a lot of noise and no action - None of the tariff actions will be committed to paper and will go away after everyone has scored political points.
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