Amidst the rise of bad loans and severe doubts plaguing performance of banking industry, last weekend of July has brought cheers in stock market with splendid performance of Yes Bank. Investors who had faith in Yes Bank management were rewarded with Net Profit of Rs 731.8 Crores for the quarter ending June 2016 compared to Net Profit of Rs 551 Crores for the quarter ending June 2015. The growth of 32% is remarkable given the whole economy is reeling under cascading effects of bad loans, Yes Bank seems unharmed.
Why am I emphasising on Yes Banks results?
Let me explain why this 32% needs big applause.
- Firstly the provisions for the bad loans (which leads to reduction in profits) was raised by 110% (Rs 206 Crs during Q1 FY 2017 and Rs 98 Crs during Q1 FY 2016). Rise in provision proves that bad and doubtful loans are taken care of through provision.
- Return on Interest income has increased by 24.2% and Non interest income (which includes syndication and asset management) has increased by 65%. Operating profit of the Bank has increased by 43.9% which is a splendid margin.
- There we see the another reason for the better performance. The spike in CASA (Current accounts and Savings accounts) by 63% and other factors led to reduction in cost of funds for the bank.
What matters most while reviewing the performance is the Asset Quality. The quality of the loans in the books of the bank is pivotal for profits of bank and managing it has always been the secret ingredient of Yes Bank. By focusing on corporate credit and diversifying the industries in loan book, Yes Bank is racing ahead of top nationalised and big private banks. High time other banks learn Yes Banks tricks!
Recently SEBI has provided in-principle approval to Yes Bank to set up an Asset Management company which will add in the value to the company’s revenues.
So if you are looking for the investment option in Banking industry, definitely my take is on Yes Bank! Say Yes to Yes Bank! 🙂
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