Monday, February 3, 2025

YES Bank Q3 results preview: Experts expect healthy YoY growth in PAT, muted NIM

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YES Bank Q3 earnings preview: The October-December quarter (Q3) earnings of YES Bank may remind investors of its Q2 performance, marked by a strong year-on-year (YoY) rise in profit. However, the bank’s earnings may remain on the softer side on a quarter-on-quarter (QoQ) basis as there is a possibility that the lender’s Q3 net interest margin (NIM) could remain flat. While experts largely expect the bank to report stable performance for Q3FY25, investors will focus on profitability, asset quality ratios, and the management’s comments on the road ahead.

YES Bank will disclose its Q3 results on Saturday, January 25.

YES Bank Q3 result expectations

Giving its Q3 business updates in January’s first week, YES Bank reported loans and advances of 2,45,035 crore, up 4.20 per cent QoQ against loans and advances of 2,35,117 crore and up 12.60 per cent YoY against 2,17,523 crore. The bank’s deposits stood at 2,77,199 crore in Q3FY25, 14.60 per cent higher than 2,41,831 crore reported in Q3FY24.

Noting YES Bank’s Q3FY25 business updates, experts expect the lender’s Q3 earnings to be stable.

However, most of them expect pressure on NIM due to a shortfall in priority sector lending (PSL) compliance.

Also Read | Yes Bank share: Is this a stock to buy after Q3 update? EXPLAINED

“YES Bank is positioned to deliver stable performance this quarter. However, there may be some pressure on NIM due to a shortfall in PSL compliance, which is currently allocated to low-yielding investments (rural infrastructure development fund or RIDF) and is likely to remain an issue in the medium term,” said Abhishek Pandya, a research analyst at StoxBox.

Pandya underscored that YES Bank’s provisional figures showed that its deposits have increased more than advances, indicating that the bank is taking precautions moving forward, particularly in light of the stress observed in the microfinance institution (MFI) and unsecured lending segments within the banking sector.

Pandya also expects steady progress in recovering loans and upgrades as security receipts mature.

Pravesh Gour, a senior technical analyst at Swastika Investmart, pointed out that YES Bank has demonstrated tenacity in the past by consistently improving its quarterly earnings.

The Q3 numbers could show profit growth, but the focus would be on profitability and asset quality ratios.

Gour believes the banking player may see muted NIM for Q3FY25 due to the PSL compliance deficiency presently parked in low-yielding investments (RIDF). This deficiency will probably persist in the medium term, which could put some pressure on NIM.

Gour highlighted YES Bank’s Q3 update, in which the private lender reported a strong 14.6 per cent YoY gain in deposits and a 12.60 per cent YoY increase in loans and advances.

“Strong demand and efficient risk management are reflected in the bank’s loan book’s consistent growth. Customer satisfaction and acquisition data have been positive, indicating strong company foundations,” Gour observed.

Brokerage firm SMC Global Securities expects YES Bank to deliver a double-digit YoY growth and flat QoQ in NII for Q3FY25.

The brokerage firm highlighted that the December quarterly updates signify that the bank’s loan and advances growth was higher when deposit growth was almost nil sequentially. Also, the credit-to-deposit ratio grew by 360 basis points on a QoQ basis, highlighting the bank’s ability to maintain good loan book growth at a time of slowdown in consumer demand.

Overall, SMC Global expects YES Bank to report flat NII growth sequentially with muted NIM due to a shortfall in PSL compliance.

“NII is expected to reach 2,219.2 crore, up 10.2 per cent YoY and 0.87 per cent QoQ. The net profit is likely to grow to 559.4 crores, up 142.16 per cent YoY and 1.15 per cent QoQ in the third quarter. Net interest margin (NIM) might remain the same at 2.4 per cent,” said SMC Global.

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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