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RETAIL BANKING | Staff Reporter, India

YES Bank Q1 loan growth doubles by 53% while state counterparts flounder

Retail and business lending ballooned by 56%.

YES Bank's loan growth soared by 53% YoY in Q1 on the back of its strong-performing retail and business lending segments, according to Maybank Kim Eng.

The lending surge was partially attributed to housing loans although exposure to vehicle loans clocked in at 40%. Corpporate and institutional banking unit (IBU) loans also soared 52% YoY, to 68% of the bank's total loan mix.

IBU loans, which are primarily international wholesale loans, grew 217% YoY from a low base. 

The bank's faster-than-expected rollout of its retail loan products is also set to contribute to its profitability in the coming months. 

"YES believes forging relationships with new large corporates, even at the cost of margins, will open up avenues for product cross-selling in the long run. Reflecting this, its large corporate book grew 52% YoY. We believe NIMs will rebound in the next 2-3 quarters as loans get re-priced upwards, on the back of rising interest rates," said analyst Vishal Modi. 

Here's more from Maybank Kim Eng: 

Asset quality was stable, with gross NPLs still at 1.3%. Management shored up provision coverage by 5.3ppts QoQ to 55.3%. Deposit growth of 42% YoY was led by fixed deposits. With a higher share of term deposits, CASA ratio fell 1.6ppts YoY to 35.1%. Most banks’ CASA ratios have been falling as their fixed-rate products have become more attractive after the recent rise in yields.

Healthy loan growth, stable credit costs and fee income should support an EPS CAGR of 27% and medium-term ROEs of 18-22%. Given its fast loan growth, YES may look to raise USD1b in the next one year. This has not been factored in our numbers. Risks include continued pressure on NIMs due to an inability to pass on cost increases from cost of funds to customers.

Exposure to some sensitive sectors was: renewable energy (2.5% of loans), iron & steel (2.6%), telecom (3.6%) and gems & jewellery (1.5%). YES financed a buy-out of a steel company in 1Q, which led to a 20bp sequential increase in exposure. It also extended loans to telcos, which raised its telco exposure by 1.4ppts. But most of these loans are extended to A-&-above-rated companies with pristine promotors, where management sees a low probability of default.

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