YES Bank shares jump 2% on Q1 results; what Arihant Capital says

Shares of YES Bank Ltd climbed 2 per cent in Monday's trade following the private lender's December quarter results. The private lender is aligning its growth strategy with a focus on profitability through disciplined execution and technological innovation, Arihant Capital Markets said in a note.

The bank, it said, is leveraging AI and generative AI to improve risk management and enhance operational efficiency, and is aiming to maintain stable net interest margins (NIMs) by the end of FY26, supported by a shift away from low-yield segments and toward stronger customer service.

YES Bank posted a net profit of Rs 801 crore in the June quarter, marking a 59.4 per cent increase year-on-year. Core income rose 3 per cent over the same period, with retail banking contributing 56.4 per cent to the bank’s core fee income. 

Operational performance improved, with the cost-to-income ratio reducing to 67.1 per cent from 74.3 per cent in Q1 FY25. Adjusted for PSLC expenses, operating expenses rose 5.7 per cent year-on-year and 1.3 per cent sequentially, the brokerage added.

Following the Q1 results, YES bank shares rose 2.13 per cent to hit a high of Rs 20.60 apiece on BSE.

On margins, Arihant Capital noted that repo rate cuts are putting pressure on NIMs, as nearly 60 per cent of the loan book is repo-linked. To offset the impact, YES Bank cut interest rates on savings accounts in April 2025 and shifted its focus from aggressive customer acquisition to deeper customer engagement. 

According to the brokerage, the bank’s increasing share of high-yield retail loans and reduced borrowing levels are helping it manage margin compression, with a goal of maintaining stability by FY26-end.

On asset quality, Arihant stated that gross NPA remained stable at 1.6 per cent, flat sequentially and slightly lower than 1.7 per cent in the same quarter last year. Net NPA stood at 0.3 per cent, unchanged from the previous quarter and down from 0.5 per cent year-on-year. The provision coverage ratio improved to 80.2 per cent from 79.7 per cent in Q4 FY25 and 67.6 per cent in Q1 FY25.

Slippages rose to Rs 1,408 crore from Rs 1,223 crore in Q4 FY25, led by accounts in microfinance, small enterprise banking, and mortgages. However, unsecured portfolios such as personal loans and credit cards showed improvement. Arihant noted that recoveries and upgrades stood at Rs 1,170 crore for the quarter.

YES Bank’s advances grew 5 per cent year-on-year, with commercial banking up 19 per cent, corporate banking up 3 per cent, and retail banking flat. Within retail, micro-enterprise banking grew 11.2 per cent. Deposits stood at Rs 2.75 lakh crore, up 4 per cent year-on-year, with retail and branch-led deposits rising 20 per cent to Rs 1.69 lakh crore. The CASA ratio improved to 38.2 per cent, an increase of 200 basis points year-on-year.

Arihant Capital also pointed to a proposed 20 per cent stake sale by SBI and other banks as part of a secondary transaction. The application for RBI approval was filed in May 2025, with a decision expected by September 2025.

In terms of recoveries, the brokerage reported that YES Bank recovered Rs 338 crore from security receipts in Q1 FY26, bringing the book value of these assets to zero. For the full year, total recoveries are estimated at around Rs 1,200 crore.

Lastly, RIDF deposits declined 16 per cent year-on-year, or about Rs 7,000 crore, aligning with an expected repayment of Rs 8,000–9,000 crore during FY26