In Q2 FY 10, the bank has sustained its growth momentum in spite of many challenges witnessed in the banking industry front such as passive credit off take, and restructuring of non-performing assets. However, the bank has benefited largely from its fee income, pricing power on corporate loan book and repricing of interest sensitive liabilities during the year. As a result, the bank has improved its operating and net profits by 50.7% and 51.9% respectively to reach a level of Rs 527 crore (Rs 350 crore in FY08) and Rs 303 crore (Rs 200 crore in FY08) during FY 09. The bank has extended its good run in the operating profits generation in Q2 FY 10, which has stood at Rs 191.8 crore as compared to Rs 98.0 crore (a growth of 95.71%) for the same period a year ago. Net interest income has increased significantly during the year to achieve a level of Rs 159.9 crore in Q2 FY 10 from the previous level of Rs 122.6 crore in Q2 FY 09.
Gross NPAs have declined from 0.68% in FY09 to 0.31% in Q2 FY 10 (0.44% in Q2 FY 09). Net NPAs have dipped from 0.33% in FY 09 to 0.08% in Q2 FY 10 (0.15% in Q2 FY 09). Restructured loans were about 0.96% of gross advances during quarter.
In spite of subdued credit growth, the banks net interest margin has improved to 3.1% during Q2 FY 10 from 2.8% for the same period a year ago. The bank was able to achieve a growth in net interest margin by penetrating the large corporate loan market and also optimizing its liability franchise. Banks yield on advances is comparatively higher than its peers average.
The banks composition of low-cost deposits to total deposits has improved marginally to 9.6% in Q2 FY 10 from at 8.73% in FY 09, considerably lower than peers average. Consequently, the bank has the highest cost of deposits among its peers as on 30th September 2009.
Brickwork calculates leverage that assesses banks capital adequacy with reference to both on and off balance sheet exposures. Yes Banks lower leverage of 13.92 (14.92 in FY08) is positive rating factor compared to its peer group leverage of 19.51 in FY09.
The rating factored, inter alia, improving operating profit, asset quality, strong capital ratio, and the management quality, low CASA deposits, limited network channels, and dependence on bulk deposits. Brickwork expects the bank to sustain its growth momentum and ensure healthy earning assets with appropriate risk management practices, and technology driven banking and has assigned Stable outlook for the Rating.