Yes Bank Ltd (YESBANK) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to YES BANK's Q2 FY27 Results Conference Call. On the management panel, we have with us today Mr. Vinay M. Tonse, Managing Director and Chief Executive Officer; Mr. Manish Jain, Executive Director; Mr. Niranjan Banodkar, Chief Financial Officer; Mr. Sunil Panandikar, Head of Investor Relations and Sustainability. Mr. Vinay M. Tonse will now give you an overview of the results, which will be followed by a Q&A session. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Participants are requested to use to ask questions pertaining to the bank's Q2 results only. For any other information, you may reach out to the Corporate Communications team separately. I now hand the conference over to Mr. Vinay M. Tonse. Thank you, and over to you, Mr. Tonse.
Vinay M. Tonse (Yes Bank Ltd): Yeah. Thank you. Good morning to all. Thank you for joining us for the quarterly results presentation, and also thank you for coming in very early today. Yeah. So before we discuss performance for the second quarter FY27, I would like to address the Honorable Supreme Court's
Vinay M. Tonse (Yes Bank Ltd): feel it is important that we address it upfront. The Honorable Supreme Court has upheld the Bombay High Court's judgment setting aside the 81 write-down and dismissed the appeals filed by YES BANK, the administrator, the Reserve Bank of India, and the Union of India. We respect the judgment and are examining it carefully, including the options available to the bank. The reconstruction of YES BANK in March 2020 took place in exceptional circumstances, with the objective of restoring the stability and viability of the institution and protecting the interest of depositors and the wider financial system. The AT1 write-down was one of the measures undertaken in that context. We are evaluating the implications of the judgment with the same institutional responsibility that guides our other decisions. Let me address the capital implications first. Based on our current assessment, which is indicative and as of 30th September 2026, the reinstatement of the AT1 principal amount is expected to have a pro forma impact of approximately 240 basis points on our common equity tier 1 ratio, including profits. Our overall tier 1 capital ratio is expected to remain around 13.7% on a pro forma basis. We recognize that the distinction between CET1 and overall tier 1 capital is important. We will continue to assess the implications for our capital structure, regulatory buffers, balance sheet strength, and future growth plans. Capital planning is an ongoing board-level process. Any capital decision will be based on a careful assessment of regulatory requirements, the cost and availability of capital, shareholder interests, and the bank's medium-term growth objectives. We will not preempt those decisions today. On the legal and accounting aspects, we are examining the judgment in detail, including the available legal options and appropriate steps going forward. We will make disclosures in accordance with applicable regulatory requirements and as the position becomes clear. We also ensure that the treatment of the AT1 bonds and related accounting matters is addressed in accordance with the judgment, the applicable contractual terms, and the advice of our legal and other professional advisors. We do not wish to speculate on implementation details or timelines before that assessment is complete. For us, the responsibility is to deal with the consequences of the judgment in a disciplined manner, while continuing to strengthen the underlying franchise. We understand that you will have questions about the capital impact, future profitability, potential capital actions, and the implications for shareholder value. We will address these questions as fully as the facts and our disclosure obligations permit, without getting into the legal interpretation of the judgment, which we are examining. Having said that, let me call out that directionally, our priorities remain unchanged, building sustainable and profitable growth, strengthening customer relationships, maintaining cost discipline, monitoring the quality of our assets, and generating durable returns for our shareholders. With that, let me talk about the quarter's results and the progress we are making across our business. Getting into the Q2 FY '27 financial performance, the bank reported a net profit of Rs. 1,080 crores (1080), an increase of 65% year-on-year. Operating profit increased by 29.4% year-on-year to 1,678 crore. Net interest income increased by 22.7% year-on-year to Rs. 2,822 crore, while the core fees grew by 15.4% year-on-year. Return on assets for the quarter stood at 0.9%, compared with 0.6% in Q2 FY '26 and 0.9% in Q1 FY '27. The cost-to-income ratio stood at 64.3%, compared with 67.1% in the corresponding quarter of the previous year. During the quarter, we crossed some critical balance sheet milestones. Total assets crossed 5 lakh crore, deposits crossed 3.5 lakh crore, and advances exceeded 3 lakh crore.
Vinay M. Tonse (Yes Bank Ltd): Now, moving to the balance sheet and deposit franchise. The bank mobilized 18,575 crore of FCNRB deposits and extended foreign currency term loans of 15,215 crore through the IBU at GIFT City. These transactions affected the reported growth rates and certain income and expenses lines during the quarter. Reported advances grew by 23.7% year-on-year. Excluding the FCTL linked to the FCNR mobilization, advances grew 17.6% year-on-year. The corresponding normalized CD ratio, the credit-to-deposit ratio, stood at 83.1%. Deposits grew by 19.5% year-on-year on an end-of-period basis and by 22.1% on an average quarterly balance basis. Retail and branch-led deposits increased by 20.9% year-on-year and constituted 58.8% of the total deposits. On an average quarterly balance basis, CASA deposits grew by 15.5% year-on-year with growth of 21.8% in current account balances and 11.6% in savings account balances. Moving to the margins. The net interest margin for the quarter stood at 2.6%. The sequential moderation of approximately 12 to 14 basis points was largely attributable to the FCNRB mobilization and the associated liquidity and deployment profile. The bank will continue to focus on calibrated deployment of available liquidity and the composition and cost of incremental deposits. Moving to the fees and operating expenses. Non-interest income increased by 14.4% year-on-year and 4.7% sequentially. Core fees increased by 15.5% YoY supported by growth in trade and cash management, loan processing fees, and card product fees. The sequential growth in loan processing fees included some associated with the foreign currency term loans and was substantially offset by related FCNR mobilization cost. Operating expenses increased by 14.2% YoY and 5.1% sequentially to Rs. 3,026 crores, that is 3026. The quarter included 51 crore of commissions on foreign currency borrowings linked to the FCNRB mobilization, Rs. 20 crore of marketing expenditure relating to the Asian Games sponsorship, and Rs. 31 crore arising from changes in Central and State wage codes. Excluding these items, operating expenses were broadly stable on a sequential basis. Moving to the asset quality and business mix. Asset quality indicators remained stable. The gross and net NPA ratios stood at 1.2 and 0.2% respectively, and both improved YoY. Gross slippages were 1.3% of advances, broadly unchanged sequentially. The net credit cost for the quarter was 0.3% of average assets, similar to Q1 FY '27. The bank also recognized P&L gains of Rs. 395 crore from the Security Receipts portfolio during the quarter. The rise in standard assets provision was primarily driven by increase in loan balances, including the FCTL portion. Growth was distributed across the bank's principal business segments. Retail asset disbursements increased by 35% YoY with the retail book growth inching up to nearly 9%. Commercial banking advances grew 20.2%, while corporate and institutional banking advances grew by 31.4% year-on-year. And on a reported basis, before considering the pro forma impact of the AT1 judgment discussed earlier, the CET1 ratio stood at 13.7% and the liquidity coverage ratio stood at 131.4%. To conclude, our priorities remain centered on improving core profitability, growing advances and deposits in a risk-calibrated manner, deepening the granular deposit franchise, managing margins and operating efficiency, and maintaining asset quality. Capital planning will remain an important area of focus as we assess the implications of the judgment and support the bank's future growth requirements.
Vinay M. Tonse (Yes Bank Ltd): and quality of its franchise. At the same time, we recognize the significance of the Supreme Court judgment and the need for a carefully considered response. We will continue to act in accordance with applicable legal and regulatory requirements, engage with the regulator and other authorities as appropriate, and keep the market appropriately informed. Thank you once again for joining us, and we'll now be happy to take your questions.
Moderator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sukrit D. Patil with I-Sec Fintrade Private Limited. Please go ahead.
Sukrit D. Patil (I-Sec Fintrade Private Limited): Good morning to the team. I have two forward looking questions. My first question to Mr. Vinay is just want to understand beyond the regular outlook, what are the top two to three execution priorities you are focusing on in the next few quarters and alongside that, what do you see as the biggest risk in credit growth, deposit mobilization and competitive in- intensity and just want to understand how are you preparing to manage them while strengthening the bank's position in the banking sector? That's my first question. I'll ask my second question after this. Thank you.
Vinay M. Tonse (Yes Bank Ltd): Sukrit, thanks for that. Going forward, we have the we have already started building strong foundational pillars for taking the growth momentum you know upwards. We have already seen a good traction and some of these are already reflecting in the quarter two as well as you would have seen in the quarter one results. One of the main initiatives that we are now driving and focusing upon is the One Bank concept where the synergies between all the verticals start working and we look at how do we meet the end-to-end customer needs of any customer, be it corporate or otherwise. The growth and scale is something which we are looking at very strongly and we're already seeing you know, optimism in ourselves that things are looking much and you know more better as months pass. Another significant positive for us would be the cross-referrals that come out of the SMBC relationship and in this also, we have already started seeing some good traction in the cross-referrals that are happening. This is in simple this is a simple response to you, Sukrit.
Sukrit D. Patil (I-Sec Fintrade Private Limited): Thank you. My second question to Mr. Niranjan is again along the similar line. Just want to understand from financial point of view, what key risk or challenges do you anticipate in the next quarter to be very precise? And what specific measures have been taken to manage margin, credit cost, capital adequacy, and overall the balance sheet strength, especially in a rate sensitive area? Thank you.
Niranjan Banodkar (Yes Bank Ltd): Thank you. So, the first point I will like to call out is on our capital because as Vinay just mentioned, we continue to keep our objectives on growth and scale and maximizing the you know, the the SMBC ecosystem value proposition intact. Clearly, when we look through our capital requirements is going to be an important element. So, CET1 in the range of pro forma basis. Again, this is not conclusive. Is at about 11.4%. We do believe that we will continue to evaluate areas of capital actions to make sure that the bank remains well capitalized in order to fulfill its growth objectives. That's point number one. Point number two, I think which is where I will like to bring focus is on our core operations. As you would have seen over the last many quarters, the bank continues to improve on the core metrics of ROA. In fact, even adjusted for security receipts, you know, bank's core of ROA continues to improve
Niranjan Banodkar (Yes Bank Ltd): we continue to see improvements in our cost to income, so about 2 years back the cost to income was in the range of 74%, it is already down to 64% as we reported this quarter. So there is an improvement that's happening there as well. The third is, if you look through our NPA credit cost that have over the last three quarters has been consistently improving, which is which is a function of our which is a function of the slippages that we have seen and that that's been one of the you know steepest improvements that we have seen. So as we as we look through our core operations, we are feeling a lot more confident and comfortable going forward. The last point I will make just because it is a reported number is it comes from the vantage point of margins. We have seen margins dip this quarter and it is I would say almost entirely attributable to the FCNR scale that that came in. So we ended up raising in INR equivalent terms about 18,000 crores of deposits, FCNR deposits, and we also had about 15,000 crores INR equivalent of foreign currency term loans in our IBU Gift City. A function of the two, which is both undeployed credit from the FCNR deposits and the and you know much wider denominator meant that our margins were lower. Now that is one area that we will work to continue to deploy the credit in Q3 and Q4. In addition, we we believe that with the interest rates actually increasing, it should have a positive bias on the margins going in. So that's one area that we will continue to observe. The second moving part is on our RIDF balances. In H2 FY '27, we will continue to have a reducing balance on our RIDF deposits. So, just as a call out you will recall we had we had deposits placed in lieu of shortfall in in PSL in the past and those balances will continue to to come down, and that will be a tailwind to margins. So, as we look through H2, to respond simplistically, there will be competitive pricing pressures on margins, but we do believe that there will be tailwinds for us to be able to offset that as well. So, our outlook when we think through H2 is December might still be closer to a stable margin structure, but as we look through March, we should have an positively improving bias. Thank you.
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