Yes Bank shares decline following Q2 business update: Deposits and advances show steady growth, LCR declines

Shares of Yes Bank fell in trading on Thursday after the private sector lender released its business update for the September quarter (Q2). The bank reported strong growth in both deposits and advances year-on-year (YoY) but noted a sequential decline in its liquidity coverage ratio (LCR), which dampened investor sentiment.

Q2 Update

In its update, Yes Bank highlighted an 18.3 percent YoY increase in total deposits for the September quarter, reaching ₹2,77,173 crore compared to ₹2,34,360 crore in the corresponding quarter last year. However, this was a slight moderation compared to the 20.9 percent YoY growth in deposits that the bank reported in the June quarter. Sequentially, deposits grew by 4.6 percent from the June quarter, showing a steady but slower pace of growth.

On the advances side, Yes Bank reported a 13.1 percent YoY rise in loans and advances, which amounted to ₹2,36,512 crore, compared to ₹2,09,106 crore in the same quarter last year. This growth, while healthy, was lower than the 14.8 percent YoY increase in advances reported during the June quarter. Sequentially, advances were up 3 percent over the ₹2,29,565 crore reported in the June quarter, indicating consistent performance but slightly slowing momentum.

Yes Bank also shared an improvement in its Current Account and Savings Account (CASA) deposits, which rose 28.4 percent YoY to ₹88,559 crore. Sequentially, CASA deposits were up 8.6 percent from the June quarter. The CASA ratio, an important metric for evaluating a bank's cost of funds, improved to 32 percent, up from 29.4 percent in the same period last year and 30.8 percent in the June quarter. This improvement reflects Yes Bank’s focus on growing its low-cost deposit base.

One area of concern was the bank's liquidity coverage ratio (LCR), which declined to 131.9 percent in Q2 from 137.8 percent in the June quarter. While the LCR was higher than the 120.9 percent recorded in the same quarter last year, the sequential drop raised eyebrows among investors. A lower LCR suggests that the bank's liquidity buffer has slightly diminished, which may impact its ability to meet short-term obligations.

The bank’s credit-to-deposit (C-D) ratio, another key measure of banking efficiency, stood at 85.3 percent in the September quarter, lower than the 86.6 percent reported in the June quarter and 89.2 percent in the same period last year. A lower C-D ratio indicates that the bank is lending out a smaller portion of its deposits, which may suggest caution in its lending strategy or underutilization of resources.

Stock Price Trend

The stock fell as much as 1.6 percent to its intra-day low of ₹22.05. It is now 33 percent away from its 52-week high of ₹32.81, hit in February this year while has rallied over 56 percent from its 52-week low of ₹14.10, recorded in October last year.

In the last one year, the private bank stock has gained over 30 percent but has been almost flat, up just around 3 percent in 2024 YTD. It shed around 5 percent in September after an 11 percent decline in August.

Yes Bank's Q2 business update reflects steady growth in deposits and advances, with notable improvements in its CASA ratio. However, concerns over the sequential decline in liquidity coverage and a lower credit-deposit ratio have likely contributed to the decline in the bank’s stock price. While the bank continues to perform well overall, especially in terms of deposit growth, its next steps in addressing liquidity and optimizing resource utilization will be key areas to watch moving forward.