Yes Bank

Yes Bank reported robust Q2 FY26 results, with Net Profit growing 18.3% Y-o-Y to INR 654 crores, or approximately 30% Y-o-Y when normalized for^📎 a prior-year income tax refund. Operating Profit surged 32.9% Y-o-Y to INR 1,296 crores. The bank achieved a 0.7% ROA for H1 FY26, remaining on track for its stated objective of 1% ROA by FY27, driven by NIM expansion, improved asset quality, and controlled operating costs.

The bank demonstrated strong deposit traction, with total deposits growing 6.9% Y-o-Y and 7.4% Q-o-Q to INR 2.96 lakh crores. CASA deposits showed even stronger growth at 12.5% Y-o-Y, leading to an improved CASA ratio of 33.7%, up 170 basis points Y-o-Y and 90 basis points Q-o-Q. Retail and Branch Banking-led deposits grew 13.7% Y-o-Y, with their CASA ratio at 39.6%, reflecting a well-executed deposit strategy despite competitive intensity.

Advances crossed the INR 2.5 lakh crore mark this quarter, registering a growth of 6.4% Y-o-Y and 3.8% Q-o-Q. Asset quality continued to improve, with fresh slippages reducing to 2% of advances from 2.4% in the previous quarter. The Provision Coverage Ratio (PCR) improved to 81%, and both GNPA and Net NPA ratios remained flat at 1.6% and 0.3% respectively, indicating a stable asset book.

Net Interest Margins (NIM) were broadly maintained at similar levels to the previous quarter, as the impact of asset repricing was largely offset by reductions in RIDF balances, high-cost borrowings, and deposit rate cuts. Management believes NIMs have bottomed out and expects future expansion, targeting 3.25-3.3%, driven by term deposit repricing and continued RIDF reduction.

The SMBC transaction was closed during the quarter, with SMBC's combined stake now standing at 24.2%. This partnership is expected to provide strategic levers for growth, particularly in transaction banking and access to large corporate clients. Additionally, the bank received credit rating upgrades from CRISIL and India Ratings to AA-, the highest level since March 2020, reflecting strengthened capital position and improved business performance.

The Retail Banking segment, which saw losses of INR 668 crores in Q1, reduced these to INR 358 crores in Q2 and has reached breakeven when normalizing for excess provisions. Management stated that the Retail segment is now aligned with strategic objectives and is expected to contribute positively to the bank's profitability going forward^⏳, with Retail loan growth targeted at 4-5% for the current financial year.

The bank demonstrated strong operating efficiency, with the Cost-to-Income ratio remaining flat at 67.1% despite lower treasury income. Operating expenses grew only 0.6% Y-o-Y and declined 4.2% Q-o-Q, indicating tight cost control. For branch expansion, the bank has successfully opened 43 new branches towards its annual target of 80, enhancing its physical presence and deposit mobilization efforts.