Speaking exclusively and candidly to businessline, Prashant Kumar, MD and CEO, Yes Bank stated there are issues on the income or the revenue side of the bank’s profit and loss statement and these may be more important and urgent to address as compared to those on the cost side. “That has come out very clear,” he acknowledged when asked why the rate of financial growth at the bank and its profitability is a laggard when compared to its peer mid-sized banks.

To put things in context, Yes Bank has far improved from what it was in March 2020, when it was placed under moratorium. Whether in terms of loan assets which stood at ₹2,17,523 crore in December FY24 quarter or deposits at ₹2,41,831 crore in Q3, numbers clearly indicate that its bad days are well behind it. What seems to remain elusive is the sustained pace of growth in financial. In Q3, for instance, even as net profit swelled by over three times year-on-year to ₹231 crore, net interest income grew by just about 2.3 per cent, while net interest margin remained slim at 2.4 per cent.

“Internally we should understand this (and work on) what is the way forward? I’m not saying somebody needs to give us a concession. But we need to understand that if we need to improve the income by doing these a few things, what we will do for execution, to reach there,” Kumar said in an upfront manner. He was also quick to add that “there is a clarity of thought within the management of the bank.”

Organic MFI foray

Over a year ago, Yes Bank expressed its keen interest in the microfinance market as it would solve the twin problem of quantity and quality of growth, that is net interest income and net interest margin. “MFI is something which has come out very clearly in our investor deck and would be very critical for our income side as well as for the drag on the profitability which is happening through the shortfall in the PSL. It would cover two things,” Kumar explained.

However, what concerns him and perhaps taking a longer time than anticipated to close in on a deal in this space is the whole bunch of integration and operational issues that come along with any acquisition. “That is also a cost,” he pointed out, adding that the bank is trying to solve this issue through different ways.

Yes Bank is working on a plan B, which is organically exploring this business. “If we are not able to acquire an MFI, we would like to do this as a business within the bank,” Kumar said. He has set a target of FY25 to put this plan in motion.

1% ROA target

While this should aid the income side of the financial statement, Kumar is clear that the cost side of the P&L may need to be reassessed if required. “If you look at large banks, their cost is also inching up in the last nine months, whereas we have been able to protect our cost despite continuous investment on retail and technology. But if we are not able to improve on the income side in a significant manner, then we need to work on all levers to cut some cost and improve income.”

Doing so would be important to reach the long-stated objective of touching one per cent return on assets. The bank ended the December quarter with annualised ROA of 0.2 per cent.  So, is one per cent ROA the goal post for FY25? “Seems very difficult. But definitely this is a goalpost for FY26,” he added.