Yes Bank posts strong Q2 profit surge driven by lending growth, lower provisions

Yes Bank, one of India's prominent private lenders, announced a significant increase in its net profit for the July-September quarter, attributing the rise to robust core lending income and a decrease in provisions for bad loans.

For the financial second quarter, Yes Bank's standalone net profit surged more than double to Rs 553 crore, compared to Rs 225 crore during the same period last year. This performance exceeded analysts' expectations, with the average forecast pegged at Rs 546 crore, according to LSEG data.

The bank's loan portfolio grew by 12.4 per cent year-on-year, while deposits saw an impressive increase of 18.3 per cent. Net interest income, the revenue generated from lending after deducting interest paid to depositors, rose by 14.3 per cent to reach Rs 2,200 crore.

The Indian banking sector has experienced robust demand for loans, driven by strong economic growth and heightened urban consumption. However, banks are facing challenges in raising deposits to support this credit growth, which has put pressure on profit margins.

Yes Bank's net interest margin, a critical measure of profitability, improved to 2.4 per cent, up from 2.30 per cent a year earlier, remaining stable compared to the previous quarter.

Additionally, the bank reported a nearly 41 per cent reduction in provisions and contingencies—funds set aside for potential bad loans—totaling Rs 297 crore. This decline was partly due to the reversal of provisions worth Rs 103 crore that were previously allocated for its exposure to Alternative Investment Funds.

Yes Bank's asset quality also showed improvement, with the gross non-performing asset (NPA) ratio decreasing to 1.6 per cent as of September 30, down from 1.70 per cent at the end of the previous quarter.

Yes Bank's shares closed down 2.6 per cent on Friday ahead of the earnings announcement.

(With Reuters inputs.)