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.