# 1. Financial Performance ## A. Key Figures * **Net Interest Income (NII):** **₹2,371 Cr** (+7% Y-o-Y) * **Net Profit:** **₹801 Cr** (+59.4% Y-o-Y, +8.5% Q-o-Q) * ROA: 0.8% (+30 bps Y-o-Y, +10 bps Q-o-Q) * **Pre-Provisioning Operating Profit (PPOP):** **₹1,358 Cr** (+4% Y-o-Y, +3% Q-o-Q) * Cost to Income Ratio: 67.1% (vs. 74.3% prior year) * CET1 Ratio: 14% · CRAR: 16.2% * Average LCR: 135.8% ## B. Net Interest Income * **Margin Resilience:** NII growth supported by improved funding mix, including reduced high-cost deposits and borrowings, as well as strategic deposit rate cuts. * **Balance Sheet Optimization:** Reductions in long-term borrowings and redemption of **₹550 Cr** in Tier 2 debt contributed to lower cost of funds. ## C. Net Profit & ROA * **Sustained Profitability:** Seventh consecutive quarter of sequential net profit growth, underpinned by operating leverage and disciplined provisioning. * **ROA Expansion:** Strong 30 bps YoY improvement in ROA reflects enhanced earnings power despite margin pressures. * **Core Income Diversification:** Core income grew modestly with increasing contribution from retail-led fee streams, now representing **4% of core fee income**. ## D. Cost to Income Ratio * **Cost Discipline Intact:** Operating expenses up 7% YoY (ex-PSLC), but cost-to-income ratio sharply improved to 1%, reflecting scale benefits and tight control. * **Strong Provision Coverage:** PCR of **80%** indicates conservative risk management and embedded resilience. ## E. Capital & Liquidity * **Capital Self-Sufficiency:** CET1 ratio of 14% comfortably supports projected **12–15% loan growth** with no near-term capital raise required. * **Liquidity Strength:** Robust LCR of 8% ensures compliance and buffers against volatility. * **Efficiency Focus:** Management prioritizing balance sheet efficiency, particularly through Advances/Total Assets optimization, to mitigate NIM compression. --- # 2. Loan Book & Credit Growth ## A. Key Figures * **Advances Growth:** **5%** YoY overall · **19%** in Commercial Banking · **3%** in Corporate & Institutional Banking · **Flat** in Retail Banking (Micro Enterprise +2%) ## B. Loan Growth Trajectory * **Guidance Reaffirmed:** Management maintains **12% to 15% full-year credit growth target**, citing Q1 seasonality and sector-wide single-digit expansion as context for slower start. * **Growth Discipline:** Strategic prioritization of **profitability over volume**, with deliberate restraint in loan growth (**5–6% YoY**) to avoid low-return or poorly priced segments. * **Selective Momentum:** Strong double-digit growth in Commercial Banking reflects targeted expansion, while Retail remains flat due to calibrated underwriting. ## C. Unsecured Portfolio Trends * **Portfolio Reset Complete:** Unsecured books, especially personal loans, have effectively **de-grown**, with asset quality now stabilizing and showing early signs of improvement. * **Future Optionality:** Improved risk metrics may enable measured re-entry into select unsecured segments, unlocking future growth potential. --- # 3. Asset Quality & Slippages ## A. Key Figures * Gross NPA: 1.6% (stable QoQ) · 1.7% prior Q1 YoY * Net NPA: 0.3% (stable QoQ) · 0.5% prior Q1 YoY * NPA Provision Coverage Ratio: 80.2% (up from 79.7% QoQ, 67.6% YoY) * **Fresh Gross Slippages:** **₹1,458 Cr** (vs. ₹1,223 Cr prior year Q4) * **Recoveries & Upgrades:** **₹1,170 Cr** * **Credit Cost:** **₹284 Cr** (0.3% annualized of Total Assets) * **Security Receipts Recovery:** **₹338 Cr** (Q1) · **₹1,200 Cr** expected full-year ## B. Asset Quality Trends * **Stable Credit Profile:** Asset quality held firm despite **5% loan growth**, with no deterioration in NPA ratios, reflecting disciplined underwriting. * **Provisioning Strength:** NPA coverage ratio improved significantly on a sequential and YoY basis, enhancing loss absorption capacity. ## C. Slippage Dynamics * **Targeted Stress:** Fresh slippages rose modestly, concentrated in **Microfinance, Small/Micro Enterprise, and mortgage segments**, while unsecured retail (PL, Credit Cards) showed improvement. * **Declining Unsecured Slippages:** Personal Loan and Credit Card slippages remain contained, with PL trending down to **₹220 Cr** this quarter. * **Forward Outlook:** Management expects **gross slippages to trend lower**, supporting future credit cost optimization. ## D. Recoveries & Credit Support * **Strong Recovery Momentum:** Material upgrades and recoveries helped limit credit costs, aided by **₹338 Cr** SR recovery with zero book value impact. * **Sustainable SR Inflows:** Full-year SR cash inflow projected at **₹1,200 Cr**, with **₹340–350 Cr per quarter** seen as maintainable, providing near-term credit cost relief. --- # 4. Funding & Deposit Mix ## A. Key Figures * **Total Deposits:** **₹2.75 Lakh Cr** (+4%) · **Retail & Branch-led Deposits:** **₹1.69 Lakh Cr** (+20%) * Retail/BRANCH CASA Ratio: 38.2% (+200 bps) * **RIDF & PSL-Related Deposits:** **↓16%** (₹7,000 Cr net decrease) · **Borrowings:** **↓16%** YoY * **RIDF Balance:** **₹37,000 Cr** (Mar-24) · **↓₹300 Cr** QoQ (Jun-24) ## B. Retail Deposit Growth * **Strong Retail Momentum:** Robust 20% YoY growth in retail and branch-led deposits driving overall deposit expansion and improving low-cost funding mix. * **Funding Parity Target:** Management reaffirms commitment to achieve **equal growth** in deposits and advances this fiscal, signaling disciplined credit expansion. ## C. Wholesale & RIDF Decline * **Strategic Shift from Wholesale Funding:** Deliberate reduction in term deposits driving a 16% YoY decline in wholesale and PSL-related deposits, supporting deleveraging and cost optimization. * **RIDF Wind-Down Progressing:** RIDF balances down to ₹37,000 Cr and expected to fall below **5% of Total Advances by FY '27**, contributing to lower credit costs and improved asset quality trajectory. * **Clarification on Repayments:** FY25 RIDF repayments guided at **₹8,000–9,000 Cr**, significantly below market speculation of ₹25,000 Cr, tempering near-term liquidity assumptions. --- # 5. Margins & NIM Outlook ## A. Key Figures * Net Interest Margin (NIM): 2.5% Q1 FY26 (+10 bps YoY) * **Yield on Advances:** ↓ **15 bps** QoQ * **Cost of Funds:** ↓ **15 bps** QoQ (driven by **20 bps** drop in deposit costs) * **Floating Rate Loan Book:** **60%** of total loans (of which **~60%** is repo-linked) ## B. NIM Performance * **Strong YoY NIM Expansion:** NIM rose significantly despite headwinds from repo rate cuts and RIDF redemptions, supported by proactive deposit repricing and stable yield-funding cost alignment. * **Near-Term Pressure, Medium-Term Stability:** NIM expected to face sequential compression through September, with gradual recovery anticipated by December; bank targeting neutral margin impact over the cycle. * **Strategic Shift in Funding Approach:** Savings rate cut reflects move away from rate-led customer acquisition toward service-led growth, while faster-repricing corporate deposits provide structural support. ## C. Rate Cut Impact * **T+1 Repricing Mechanism:** Loan yield adjustments occur monthly (not daily), delaying full rate cut impact—peak pressure expected in September quarter following cumulative 75 bps cuts. * **Funding Cost Relief Underway:** Redemptions of high-cost infra bonds and debt optimization are lowering funding costs, partially offsetting asset yield decline. * **CRR Benefit Timing:** Incremental CRR-related cost relief expected from end-September through December 2025. ## D. Yield on Advances * **Selective Lending Discipline:** Corporate book growth tempered by avoidance of low-margin deals, especially where clients have capital market alternatives, protecting portfolio yields. * **Retail Yield Buffer:** New retail loan yields are **150 bps above** the existing book, offering a partial hedge against system-wide margin pressure. --- # 6. Risks & Credit Environment ## A. Credit Rating & Assessment Upgrades * **Positive Rating Momentum:** Moody's upgraded YES Bank's long-term ratings to **Ba2** with stable outlook, citing stronger loss absorption; baseline assessment raised to **BA3**. * **Bond Ratings Enhanced:** ICRA and CARE upgraded YES Bank’s Tier 2 and infrastructure bonds to **AA-** with stable outlook, signaling improved credit confidence. ## B. Competitive & Credit Risk Dynamics * **Emerging Competitive Pressures:** Early signs of **aggressive pricing** and **relaxed credit standards** in non-mortgage consumer loans amid intense lender competition for yield. * **Improving Credit Cost Trajectory:** Credit costs expected to decline going forward, having likely peaked, with sector-specific improvements already evident. --- # 7. Guidance & Outlook ## A. Key Figures * **Debt Redemption:** **₹4,000 Cr** Basel III Tier 2 bonds to be redeemed in FY'25 ## B. Credit Growth Target * **Dividend Policy Clarity:** Board will consider dividends only upon meeting prescribed financial thresholds; no near-term payout expectations. * **Growth Drivers:** Profitable business expansion expected to accelerate on back of declining rates, stronger GDP, and resolution of trade headwinds. ## C. ROA & NIM Projections * **ROA Trajectory:** Current 8% ROA boosted by **treasury income**, raising sustainability questions; core focus remains on structural improvement despite near-term NIM pressures. * **Margin Strategy:** Path to 1% ROA hinges on **NIM expansion via profitable loan growth**, lower deposit costs, and non-interest income; bank plans to recoup margin losses from potential rate cuts.