Yes Bank sees ratings upgrades from SMBC stake buy, eyes double-digit loan growth this year, says CEO

Yes Bank expects its partnership with Japanese lender Sumitomo Mitsui Banking Corp (SMBC) may lead to further rating upgrades, and cut funding costs, managing director and chief executive officer Prashant Kumar said in an interview with CNBC-TV18. He added that the SMBC transaction, under which the Japanese bank acquired a 24 percent stake in Yes Bank, is already enhancing the lender’s standing in corporate engagement and funding markets.

“The SMBC transaction is giving us a lot of opportunities -- not only from the rating perspective but also in engaging with corporates for cash management, trade finance, and transaction banking,” Kumar said. Yes Bank expects that the strategic investment will help bring down funding costs and support profitability. The bank is targeting a 1 percent return on assets (ROA) by FY27.

Loan growth outlook

Yes Bank’s overall credit growth remains modest, but the bank aims to achieve double-digit growth this financial year, led by strong traction in the corporate and commercial banking, said Kumar. Large corporate advances rose 7.5 percent sequentially and around 15 percent year-on-year in Q2; commercial banking loans are expanding at about 16 percent and moving toward the bank’s 20 percent growth target.

“For the last six quarters, the bank has been pursuing a conscious strategy of profitable growth both on the liability and asset side,” Kumar said.

• Also read | Mutual funds maintain exposure to Pharma in September; IT, Metals start to gain ground

Margins outlook and reducing RIDF obligations

Despite repo rate cuts, Yes Bank managed to maintain its net interest margin (NIM) at 2.5 percent in Q2 FY26. Kumar attributed this to a 20-basis-point reduction in the cost of deposits and a 30-basis-point decline in the overall cost of funds. The improvement was also aided by an increase in low-cost current and savings account (CASA) deposits, which grew 12.5 percent year-on-year -- nearly double the overall deposit growth.

He said the bank’s exposure to the rural infrastructure development fund (RIDF), which once stood at over 10 percent of total assets, has now reduced to 7.8 percent. A further Rs 9,000 crore repayment expected next year will release additional funds for lending.

Kumar said Yes Bank continues to meet all priority-sector lending norms and has no fresh requirement to park funds in RIDF. “All these factors will help in improving margins going forward,” he said, adding that deposit repricing and funding cost control will remain key priorities.

Financial performance

Yes Bank’s net profit rose 18.3 percent year-on-year to Rs 654.5 crore in the September quarter (Q2 FY26), supported by lower interest expenses and higher other income despite a 3 percent decline in net interest income to Rs 2,300.9 crore. Total income fell 1.2 percent to Rs 9,023.2 crore. Provisions increased 41 percent on-year to Rs 419 crore, while asset quality remained stable, with the gross non-performing asset ratio unchanged at 1.6 percent.

Yes Bank shares have gained nearly 16 percent year-to-date to Rs 22.73 as of Thursday's close. The stock has outperformed benchmark Nifty 50, which has returned 9 percent during the period.

---

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.