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Yes Bank looking to expand margins by 100 bps within the next 3 years, says MD

8 Jun 2023 , 10:23 AM

According to its managing director and CEO who talked to Reuters, Yes Bank expects room to increase its net interest margin by 100 basis points over the next three years by attracting more low-cost deposits and lending to clients who have higher yields.

The lender, which was saved by a group of state-owned institutions and private banks in 2020 following a sharp increase in bad assets, is attempting to increase profitability through efforts to increase net interest margins (NIM) and reduce loan-loss provisions.

Yes Bank reported a NIM of 2.8% for the January-March quarter, up 30 basis points from the prior year but under larger private lenders like ICICI Bank and HDFC Bank, which had margins of more than 4%.

He noted that Yes Bank is also counting on a faster increase in fee income to help boost margins.

Additionally, it is concentrating on lending to customers who can generate bigger margins. These could be business or retail clients who are rated just below the highest-ranked borrowers but who still don't pose a significant danger, he said.

'There will undoubtedly be assets with a BBB rating, but their risk is low. We will gain pricing power there, the MD continued.

When it comes to making payments on time, securities with the BBB rating are considered to have a modest degree of safety.

The bank is considering buying a microlender this year to increase lending to key sectors,

In the meanwhile, Yes Bank plans to increase loans by 15% to 20% in its fiscal year 2024.

According to him, the transfer of 480 billion rupees worth of bad debts to private equity firm J.C. Flowers is expected to result in a bad loan recovery of at least 50 billion rupees.

The consortium that made investments in Yes Bank as part of the rescue plan had a share lock-in term that ended in March of this year. Kumar stated that significant owners, including State Bank of India, have not yet sold their shares.

For feedback and suggestions, write to us at editorial@iifl.com

Related Tags

  • Banking
  • Margins
  • Yes Bank
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