Yes Bank — Q3 FY26 earnings call

Call held 17 Jan 2026

Management summary

Yes Bank delivered a strong Q3 FY26, marked by significant improvements in profitability, asset quality, and operational efficiency. Net Profit surged by 55% YoY, and ROA improved to 0.9%. The bank saw NIM expansion, a reduction in NPAs, and the lowest slippage levels in eight quarters. Retail Banking achieved breakeven, signaling a positive turnaround, despite a one-time gratuity provision impacting reported profit.

Highlights

  • Net Profit of INR 952 crores, registering a strong growth of 55% Y-o-Y and 45% on a quarter-on-quarter basis.

  • Annualized Return on Assets (ROA) for Q3 FY26 improved to 0.9% against 0.6% in the previous quarter.

  • Pre-Provisioning Operating Profit (PPOP) adjusted for gratuity impact improved by 28.7% Y-o-Y and 7.1% on a sequential basis to INR 1,389 crores.

  • Cost-to-Income ratio adjusted for gratuity impact for Q3 was 66.1% against 67.1% in Q2 FY26 and 71.1% in Q3 last year.

  • Net Interest Margin (NIM) came in at 2.6%, a 12 basis point expansion on quarter-on-quarter basis and 24 basis points on Y-o-Y basis.

  • Gross NPAs improved to 1.5% from 1.6% and Provision Coverage Ratio increased to 83.3% against 81% in Q2 FY26.

  • Fresh Slippages were contained at INR 1,050 crores, the lowest slippage level in the last eight quarters.

Concerns

  • Reported Net Profit had an impact of INR 155 crores due to incremental Gratuity provision.

  • Headline credit growth currently lacks the system growth.

  • Absolute CASA balance has not grown meaningfully for the past couple of quarters, despite strong average growth.

Key financials

  1. Net Profit ₹952 Cr +55%YoY
  2. Adjusted Net Profit ₹1,068 Cr
  3. Annualized ROA 0.9%
  4. PPOP (Adjusted) ₹1,389 Cr +28.7%YoY
  5. Cost-to-Income Ratio (Adjusted) 66.1%
  6. NIM 2.6%
  7. Total Advances ₹2.57L Cr +5.2%YoY
  8. Total EOP Deposits ₹2.93L Cr +5.5%YoY
  9. Gross NPA 1.5%
  10. Net NPA 0.3%
  11. Provision Coverage Ratio 83.3%
  12. Fresh Slippages ₹1,050 Cr
  13. Bank-level Slippage Ratio 1.6%
  14. Cost of Funds 5.9%

What they filed

Q1 FY27: revenue up 5.9%, net profit up 32.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue7,737 7,833 7,623 7,605 7,389 −4%7,553 −4%7,662 +1%8,054 +6%
Net profit567 619 745 809 664 +17%957 +55%1,082 +45%1,072 +33%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Retail Segment Advances
    47% Share of Total Advances
  • Commercial Banking Segment Advances
    26% Share of Total Advances
  • CIB Segment Advances
    27% Share of Total Advances
  • SME Advances
    29.3% Share of Total Advances

Guidance & targets

Profitability

  • Annualized ROA Profitability · exit quarter of FY26 · High confidence 1%
    Adjusting for this impact, the Net Profit after tax is actually INR 1,068 crores, translating to an annualized ROA of 1%, a guidance of achieving closer to 1% ROA in the exit quarter of FY '26 and for the full year of FY '27.

    — Prashant Kumar

  • Annualized ROA Profitability · full year FY27 · High confidence 1%

    — Prashant Kumar

  • Annualized ROA Profitability · mid-term · Medium confidence 1.5%
    Looking ahead, YES BANK remains committed to its strategic road map of profitable growth, targeting full year 1% ROA for FY '27 and 1.5% in mid-term, with growth outlook which will be in line or marginally higher than the industry.

    — Prashant Kumar

Asset Quality

  • RIDF Balances as % of Total Assets Asset Quality · by FY27 · High confidence below 5%
    As a result, our RIDF balances have continued their steady decline from a peak of around 11% in FY '24, to around 6.9% in quarter 3, and Bank remains well on track to further reduce it to below 5% of Total Assets by FY '27 in line with our guidance.

    — Prashant Kumar

  • SR Recoveries Asset Quality · FY26 · High confidence INR 1,200 crores
    We have given a guidance for this year in terms of having a recovery of INR 1,200 crores for the entire year. We have already achieved INR 1,113 crores, okay. So I think fortunately like our estimation on this part has been proved correct.

    — Prashant Kumar

  • SR Recoveries Asset Quality · next year (FY27) · Medium confidence INR 800 crores
    But I think next year onwards also we would be seeing maybe recoveries in the range of INR 800 crores.

    — Prashant Kumar

Credit Growth

  • Credit Growth Credit Growth · current quarter (Q4 FY26) · High confidence >3% Q-o-Q
    We are very confident that we would be sequentially be able to grow more than 3% in the current quarter, which will take our Credit growth to around 8% okay.

    — Prashant Kumar

  • Credit Growth Credit Growth · current financial year (FY26) · High confidence ~8%
    Immediately, what we are looking for the current financial year would be somewhere around 8%.

    — Prashant Kumar

  • Credit Growth Credit Growth · next financial year (FY27) · Medium confidence in line with market
    And for next financial year, we would like to be in line with the market.

    — Prashant Kumar

Credit Cost

  • Net Credit Cost (Non-tax Provisions to Assets) Credit Cost · full year FY26 · High confidence below 50 bps
    But on the whole, we've always said that we had guided last year that our Net Credit Cost, Non-tax Provisions to Assets should be below 50 basis points for the full year. I think we're happy to state that I think that's something we should be able to continue regardless of the volatility that will happen during different quarters.

    — Niranjan Banodkar

What to watch in Q4 FY26

Annualized ROA for Q4 FY26

next quarter (Q4 FY26 results)
Current 0.9% (Q3 FY26)
Target 1%

Why it matters

A key profitability metric, management has guided for 1% ROA in the exit quarter of FY26.

Adjusting for this impact, the Net Profit after tax is actually INR 1,068 crores, translating to an annualized ROA of 1%, a guidance of achieving closer to 1% ROA in the exit quarter of FY '26 and for the full year of FY '27.

Risks & concerns

  • Impact of Gratuity Provision

    medium

    A one-time provision of INR 155 crores for gratuity impacted reported Net Profit, though adjusted profit is higher.

    Management acknowledged

  • Competitive Intensity and Rate Cuts

    medium

    Heightened competitive intensity and multiple rate cuts are causing pressure on margins, though the bank has managed to strengthen earnings.

    Management acknowledged

  • Strategic Avoidance of High-Growth Retail Segments

    low

    The bank is deliberately not pursuing aggressive growth in Home Loans, new Car Loans, and Gold Loans due to unattractive risk-adjusted returns.

    Management acknowledged

  • Volatility in Specific Provisions from SR Redemption

    low

    Analyst questioned if SR redemption could cause volatility in credit costs, management clarified that NPA provisioning is the right metric and provided future SR recovery guidance.

    Analyst acknowledged

Q&A highlights

5 direct, 1 evasive
Recovery from ARC book and Retail Banking profitability Direct
Since we have assigned this to ARC, on a cash basis, we have recovered INR 7,500 crores for YES Bank, okay. That is one thing. And we continue to have almost like INR 1,800 crores of outstanding Security Receipt... I'm really happy to report that this quarter, our Retail businesses have breakeven, and going forward, we would be going to see a significant contribution in the Profitability of the Bank from the Retail.

Clarifies the progress on legacy asset resolution and signals a significant turnaround in the Retail segment's financial performance.

Asked by Pankaj Agrawal

Retail disbursals growth and CASA balance growth Partial
So, I think there are two things. Like first, in terms of Retail disbursement if you see with the confidence in terms of the underwriting and the collections, I think we have started seeing the disbursement, which is 15% higher on a Y-o-Y basis... On your CASA, I think, I would just like to make one point. Today, if you see our Overall Deposit Growth and the Deposit Growth of the CASA, is doing much better than what the industry is doing, especially when I talk about the Retail.

Addresses concerns about slower Q-o-Q Retail disbursals by highlighting Y-o-Y growth and strategic selectivity, and explains CASA growth in context of industry and rate actions.

Asked by Jayant Kharote

YES Bank's differentiation strategy and balancing investments with profitability Direct
So, I think first responding to your second question, in terms of investment for future and also at the same time, maintaining a balance between the Profitability. So, I think if you see last four, five years, we have heavily invested in both technology and our Retail network expansion. And despite this, we have been able to control our Cost to Asset... Coming to your first question in terms of how we need to differentiate in terms of our SME and the digital side, I think if you see on the SME, we are showing one of the best loan growth.

Outlines the bank's strategy for growth in SME and Retail, emphasizing profitable growth and controlled operating expenses despite continued investments in technology and branches.

Asked by Sucrit D. Patil

Gratuity provision impact compared to other banks Direct
So Jai, in terms of the our understanding of what the wage bill is talking about, that you need to calculate gratuity, assuming that your wages have to be at least 50% of your fixed pay. As per our wages construction, currently, the basic pay is around 30% of the total fixed pay. So if we have to define as per the new wage bill, then the gratuity has to be worked on the basis of if the basic becomes almost 50% of that.

Provides a detailed explanation for the higher gratuity provision, linking it to the interpretation of new labor codes and the bank's wage structure.

Asked by Jai Mundhra

Sustainability of SR redemption and volatility in specific provisions Direct
So I think just on the NPA provisioning, the credit cost in March, we did see provisions of about INR 900 crores. They kind of came for the next two quarters at about INR 680-odd crores, which has now come down to about INR 533 crores, right? And it's also clearly coinciding with the way our core Asset Quality performance has improved... But I think next year onwards also we would be seeing maybe recoveries in the range of INR 800 crores.

Clarifies the trend in credit costs and provides guidance for future SR recoveries, addressing concerns about potential volatility.

Asked by Jai Mundhra

Advance growth targets for current and next financial year Direct
No, I think we are not like aspiring for that kind of loan growth, okay? We are more in terms of a Profitable loan growth. We don't want to simply grow for a top line purpose, without having a Profitability. So I think mid-teen or high teen is sometimes a way, okay. Immediately, what we are looking for the current financial year would be somewhere around 8%. And for next financial year, we would like to be in line with the market.

Sets clear expectations for credit growth, prioritizing profitable expansion over aggressive volume, and provides specific targets for FY26 and FY27.

Asked by Dev Dey

Timeline for dividend declaration Evasive
Nagesh, at this point of time, I think it's very, very difficult. We need to discuss this part in terms of Board and others, but I think at the right time, we would also accomplish.

Indicates that dividend declaration is not imminent and requires further internal discussions, managing investor expectations.

Asked by Nagesh Motamarri

Loan book doubling for stock price appreciation Partial
No, but I think first of all, thank you so much for understanding and appreciating the performance of the Bank. I think what we also need to say be cautious of, that, ultimately what is the expectation. As per our understanding, expectation from the investor is always in terms of Profitable growth, instead of maybe doubling the loan book, where you don't earn and you come across the credit issues going forward.

Reiterates the bank's focus on profitable and calibrated growth rather than aggressive loan book expansion, linking it to long-term investor value and avoiding past credit issues.

Asked by Anurag Khurana

3 min read 6 chapters

Detailed narrative

Strong Profitability Growth and ROA Expansion

Yes Bank reported a Net Profit of INR 952 crores in Q3 FY26, marking a significant 55% Y-o-Y and 45% Q-o-Q growth. The annualized Return on Assets (ROA) improved to 0.9% from 0.6% in the previous quarter. Adjusting for a one-time gratuity provision of INR 155 crores, the adjusted Net Profit stood at INR 1,068 crores, translating to an adjusted annualized ROA of 1%. The bank aims to achieve 1% ROA by the exit quarter of FY26 and for the full year of FY27, with a mid-term target of 1.5%.

NIM Expansion and Cost Efficiency

Net Interest Margin (NIM) expanded to 2.6% in Q3 FY26, a 12 basis point increase QoQ and 24 basis points YoY. This was driven by the rundown of legacy RIDF balances (from ~11% peak in FY24 to ~6.9% in Q3 FY26) and an improved funding mix. The Cost-to-Income ratio, adjusted for gratuity, improved to 66.1% from 67.1% in Q2 FY26 and 71.1% in Q3 last year, supported by a 9.7% Y-o-Y growth in Total Income against a modest 2% Y-o-Y growth in adjusted OpeX.

Robust Asset Quality Improvement

The bank demonstrated significant improvement in asset quality, with Gross NPAs reducing to 1.5% from 1.6% in the previous quarter, while Net NPAs remained stable at 0.3%. The Provision Coverage Ratio (PCR) strengthened to 83.3% from 81% in Q2 FY26 and 71.2% in Q3 last year. Fresh slippages were contained at INR 1,050 crores, the lowest in eight quarters, leading to a Bank-level Slippage Ratio of 1.6% (down from 2.0% in Q2 FY26).

Strategic Credit Growth and Deposit Franchise

Total Advances grew by 2.9% QoQ and 5.2% YoY to INR 2.57 lakh crores. The bank is strategically selective, avoiding aggressive growth in segments like Home Loans, new Car Loans, and Gold Loans due to risk-adjusted returns. SME advances constitute 29.3% of total advances, showing robust growth. The deposit franchise maintained healthy momentum, with Total EOP Deposits at INR 2.93 lakh crores (+5.5% growth). Retail Deposits (QAB) grew 12% Y-o-Y, and the Cost of Funds reduced to 5.9% from 6.5% last year.

Retail Banking Performance and Future Outlook

The Retail Banking segment achieved breakeven this quarter, with management expecting significant contributions to profitability going forward. Retail Asset disbursements increased by 15% Y-o-Y, supported by improved risk metrics. The bank continues to expand its branch network, adding 33 new branches in Q3 FY26, bringing the total to 1,328. Branches now contribute approximately 52% of Retail Asset disbursements, up from 37% two years ago.

Legacy Asset Resolution and Credit Costs

The bank recovered INR 555 crores from fully provided Security Receipts (SR) in Q3 FY26, bringing cumulative YTD recoveries to INR 1,113 crores against a FY26 guidance of INR 1,200 crores. For FY27, the bank expects SR recoveries of around INR 800 crores. Normalized Net Credit Costs (excluding SR P&L gains) stood at 0.5% of Average Assets in Q3 FY26, compared to 0.7% in Q2 FY26 and Q3 last FY, with a full-year FY26 guidance of below 50 bps.

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