Yes Bank reported 18.4% credit growth for Q1 FY27, reaching a key 1% Return on Assets milestone. However, slowing deposit collection and a declining CASA ratio remain areas for investor attention. The bank's future profitability will depend on its ability to bridge the gap between loan growth and deposit mobilization while managing net interest margins.
Yes Bank has shown a pickup in business activity, reporting 18.4% year-on-year credit growth for the first quarter of fiscal year 2027. This represents a 4.3% increase compared to the previous quarter. The bank is currently focusing on increasing its corporate loan book while trying to balance the mix with commercial and retail lending. Management has signaled an intention to keep growth rates aligned with or above the broader banking system levels throughout the current fiscal year.
Despite the expansion in lending, the bank faces a challenge in mobilizing deposits. Data from the most recent quarter indicates a sequential decline in both total deposits and the Current Account Savings Account (CASA) ratio, which dropped to 32.7%. The widening gap between the growth of loans and the growth of deposits is an important area for investors to track, as it can put pressure on the bank's liquidity and cost of funding.
Margin Trends and Asset Quality
Profitability metrics have shown some improvement, with the Net Interest Margin (NIM) reaching 2.7% in the final quarter of FY26. This was achieved through a mix of better deposit cost management and a lower reliance on high-cost borrowings. The bank is also benefiting from a gradual reduction in its exposure to low-yield assets like the Rural Infrastructure Development Fund, which historically dragged down margins.
On the asset quality front, the bank reported gross slippages of Rs 1,102 crore in the last quarter of FY26, representing about 1.6% of its advances. The recovery of bad loans exceeded the bank’s internal guidance, with Rs 1,559 crore recovered during the year against a target of Rs 1,200 crore. The bank ended the last fiscal year with a Gross NPA ratio of 1.3% and a Net NPA ratio of 0.2%, supported by a healthy provision coverage ratio of 82%.
Strategic Outlook
Having successfully reached its internal 1% Return on Assets (RoA) target in Q4 FY26, the bank now faces the task of sustaining this level of performance. Future improvements in RoA may be difficult to achieve through lower credit costs alone, as these are already at low levels due to recent write-backs and gains on security receipts. Therefore, the bank's ability to drive earnings will depend heavily on expanding net interest margins and maintaining stable operational costs.
Investors will likely look for updates on the bank’s partnership with Sumitomo Mitsui Banking Corporation (SMBC), including its NBFC arm. This relationship is often viewed by the market as a potential catalyst for future growth. The next important milestones for the bank will be the trend in deposit growth and whether the CASA ratio can recover from its recent dip, as these factors will dictate how the bank funds its ongoing loan book expansion.