Yes Bank's turnaround explained

**SPEAKER_1** (0:01)
Hello folks, you're tuned in Finshots Daily. In today's episode, we explain how Yes Bank rebuilt its foundation after one of the biggest crises in Indian banking history, and whether it is truly back.
But before we begin, here's a quick note from Team Ditto. This weekend, we're hosting a free two-day insurance masterclass that helps you build real financial security by understanding health and life insurance the right way. Well, the masterclass is completely free, and you can head to the link in the description to register while your seats last. Okay, let's start with the story.
In March 2020, Yes Bank found itself at the center of India's biggest banking crisis. Well, at least one of India's biggest banking crisis. Once celebrated as one of the country's fastest growing private lenders, the bank had spent years aggressively lending to large corporate groups, many of which were already under financial stress.
When several of these borrowers defaulted, Yes Bank's balance sheet began to unravel. Panic depositors rushed to withdraw their savings, investor confidence completely evaporated, and the RBI had to step in with an emergency moratorium capping withdrawals at Rs. 50,000. It took a massive rescue package led by SBI and a consortium of private banks to prevent the lender from collapsing entirely.
For years after the rescue, every quarterly result was scrutinized to see whether the bank was genuinely recovering or merely benefiting from regulatory support and one-off measures. Investors remained sceptical, customers were cautious, and the bank had to rebuild a reputation shattered almost overnight. The turnaround, however, didn't happen overnight. Since the 2020 rescue, Yes Bank has spent years cleaning up its balance sheet, raising fresh capital, and reducing bad loans and steadily returning to profitability. But this quarter marks an important milestone in that journey. In the first quarter of FI27, Yes Bank reported a net profit of Rs 1071 crore, up 33% year-on-year, and the first time it has crossed the Rs 1000 crore mark since the crisis. Gross NPAs declined further to 1.3% from 1.6% during the same quarter last year, continuing a multi-year improvement in asset quality. The bank has also attracted a strategic investor in Japan's Sumitomo Mitsui Banking Corporation, which last year agreed to acquire a substantial stake from SBI and other consortium banks, becoming its largest shareholder. That said, at the end of the day, for many investors, this raises a simple question. Is Yes Bank finally back? Well, to answer that, it's important to understand that banks are fundamentally different from most other businesses. If an automobile company reports higher profits after a difficult period, investors may conclude that demand has recovered. But banks don't manufacture products or own factories. Their business is built on confidence. Depositors hand over their savings because they trust the bank will safeguard them, and borrowers take long-term loans because they trust the bank will continue to finance them.
Once that trust is broken, rebuilding it is often far more difficult than repairing a balance sheet. So, when can we truly say that a failed bank has recovered? Well, arguably, this is the more important question. And there isn't a single financial metric that can answer it. Instead, you have to look at a combination of indicators that collectively tell you whether a bank is merely surviving or genuinely becoming stronger. So, let's put Yes Bank through five simple tests.
Can it make money consistently, which is profitability? One of the biggest signs that a bank is truly back on track is whether it's making money from its core business, which is lending and banking services, instead of relying on one-time gains. In the years after its rescue, many critics argued that Yes Bank's profits were being propped up by treasury gains and recoveries from old stressed assets rather than healthy lending. This quarter, however, tells a different story. Net interest income rose 17.5%, operating profit jumped more than 25%, and the management said this growth came despite a sharp fall in treasury income and recoveries from security risks. So, you could say that Yes Bank is increasingly making money from banking itself. But there's another number investors watch closely, and that is return on assets. It measures how much profit a bank earns for every rupee of assets it manages.
Now, for Yes Bank, this metric has dramatically improved from minus 7.1% during the crisis to around 0.9% today. Now, that's a huge turn around. But it's still behind top private banks like HDFC Bank and ICICI Bank, both of which generate an ROA of over 1.5%.
Okay, the second test. Do customers trust it again? Which is deposits and Kasa.
For most businesses, revenue is the ultimate vote of confidence. For banks, it's deposits. If people don't trust a bank, they simply won't leave their money there. That's why Yes Bank's deposit growth is perhaps one of the strongest indicators that confidence is returning. Deposits have grown by more than 14% year on year to over 3.15 lakh crore rupees. For a bank that witnessed a depositor panic in 2020, this suggests customers are once again willing to trust the institution with their savings. Similarly, advances have grown by over 18%, indicating that borrowers too are increasingly comfortable building long-term relationships with the bank. But deposit growth alone doesn't tell the full story. Banks also care about where these deposits come from. Money kept in current and savings accounts at SCASA is especially valuable because it's usually cheaper for banks and customers tend to leave it there for longer. In Q1 FY27, Yes Bank's SCASA ratio stood at 32.7%, while retail and branch deposits made up nearly 60% of its total deposits.