YES Bank surpassed Street expectations with second quarter profit after tax rising a whopping 30 percent to Rs 482.5 crore on lower provisions and higher net interest income (NII)
The NII grew by 27.4 percent year-on-year to Rs 856.4 crore compared to Rs 672 crore during the same period. Even the Net Interest Margin stood at 3.2 percent against 3 percent on a sequential basis.
Discussing the results, Manish Ostwal, Head of Research & Senior Analyst - Financials, KR Choksey Institutional Securities, said the bank has definitely posted a strong set of numbers. He said the margins have definitely expanded during the quarter and there has been some pick up in the loan growth as well.
KR Choksey Institutional Securities has an accumulate call on YES Bank with a target price of Rs 660. “We will review our numbers post the conference call,” Ostwal said.
Below is the transcript of Manish Ostwal’s interview to CNBC-TV18’s Ekta Batra and Anuj SinghalEkta: Your first thoughts on YES Bank? A: YES Bank delivered a very strong set of numbers, above our expectation and market expectation. They have managed to expand revenue margins during this quarter mainly because there was a positive impact on capital raising and there was decline in the wholesale rates during the quarter. So both have played out positively for margin expansion for YES Bank and asset quality both gross and Net NPA level so they delivered commendable performance during this quarter given the circumstances.
Ekta: Going by the NII growth which has been so strong, what do you think has been the net interest margin performance by YES Bank this time as well as the loan growth, any parameters that you have managed to look at? A: Margin definitely expanded this quarter and loan growth we have seen some pickup in the corporate credit in many of the retail banks like IndusInd Bank and HDFC Bank. So we think there was some pickup in the loan book also and on top of that the margin expansion due to capital raising and the wholesale rates declined.
Anuj: What is your call on YES Bank at current price?A: We have accumulate call on the stock with a target of Rs 660, we will definitely review our numbers post the conference call. Ekta: Going by the fact that wholesale rates as well as may be capital raising and the QIP funds that they raised benefitted them this quarter, do you think this quarter might be a one-off and there could be some tapering in the coming quarters?A: Decline of wholesale rates definitely give some comfort to the margins however at this level 3.2 percent kind of margin there will be some tapering off but since the benefit of declining interest rate will also come into place, so 3.1 margin can be sustainable going forward.
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