Navigating Yes Bank’s Financial Landscape
Yes Bank’s cost of acquiring deposits appears to have reached its zenith at 6.1%, with the institution poised to uphold its net interest margin (NIM) of 2.4% throughout the fourth quarter. In an exclusive conversation with Piyush Shukla, MD & CEO Prashant Kumar reveals the bank’s strategies for safeguarding its current account savings account (CASA) at a formidable 30%. Here are the key takeaways:
Strategic Insights
Declining to offer commentary on their equity prospects, Kumar highlights that the bank’s deposit expenses, relative to the broader market, remained stable during the December quarter, indicating a plateau in costs. Despite intense competition in the deposit domain, Yes Bank refrained from hiking rates in January and February, yet discerns no adverse effects in terms of escalated deposit expenses.
Exploring Yield Enhancement
Kumar emphasizes the potential for bolstering yields on retail assets, noting that a substantial portion of the bank’s retail loans presently yield lower returns. By transitioning towards products with slightly higher returns, such as the shift from new car loans to pre-owned car loans and from prime mortgage loans to affordable housing loans, Yes Bank aims to augment its earnings.
Vigilant Cost Management
Highlighting their prudent expense management, Kumar underscores the marginal 0.6% sequential growth in operating expenses as reflected in their Q3 financials.
Deposit Growth Dynamics
Regarding the 3.2% sequential surge in deposits, Kumar attributes this growth to the bank’s emphasis on expanding its branch network, which has proven instrumental in attracting deposits. Additionally, the bank’s commitment to delivering premium convenience and superior service quality, coupled with its earlier investments in digital infrastructure, has yielded positive outcomes.
Stability in Deposit Rates
Responding to queries about the trajectory of deposit rates in March, Kumar indicates that rates are currently expected to remain stable. However, he emphasizes the need for continuous vigilance, with decisions contingent upon evolving circumstances and the deliberations of the bank’s asset liability committee.
CASA Ratio Outlook
In light of the industry-wide decline in CASA ratios, Kumar acknowledges the pressure but asserts Yes Bank’s ability to safeguard its CASA ratio relative to the previous year and the preceding quarter. While anticipating challenges in improving the CASA ratio, the bank remains steadfast in its commitment to preserving it at the current level of approximately 30%.
NIM Projections
Acknowledging the adverse impact of prevailing high interest rates on net interest margins across the banking sector, Kumar underscores Yes Bank’s persistent efforts to uphold its NIM at the existing level of 2.4%, a feat they have achieved consistently amidst challenging conditions.
