Yes Bank Q3 Results Review - Ageing-Related Provision Drags Earnings: ICICI Securities

ICICI Securities Report

Yes Bank Ltd.’s earnings in Q3 FY23 were weighed down by higher than anticipated provision related to ageing of stressed assets. Reported profit after tax plunged 66% YoY / 81% QoQ to Rs 0.52 billion (much below our and consensus expectations).

Nonetheless, operating profit growth of 16% QoQ / 25% YoY was better than estimates. Post the sale of stressed pool to JC Flowers ARC, gross non-performing assets contracted to 2% and net non-performing assets to 1% (as guided).

Yes Bank now carries net SRs of Rs 37.7 billion and valuation/ageing provisions on the same, if not offset by recoveries and resolutions, may keep earnings volatile. It has concluded capital raise of Rs 89 billion in Q3 FY23 from Carlyle and Advent and has received Rs 50.93 billion towards equity and Rs 9.5 billion towards warrants.

Net interest income was flat QoQ / up 10% YoY as net interest margins came off 10 bps QoQ to 2.5%. This was offset by non-interest income growth of 24% QoQ / 56% YoY.

Operating expenses too were relatively contained – rising 4% QoQ and 25% YoY. New business formation is gaining traction with Q3 FY23 disbursements at Rs 273.1 billion (versus Rs 241.5 billion in Q2, Rs 226.4 billion in Q1) and advances growth should catch up with peers.

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