Yes Bank sees improvement in asset quality, Q3 net profit surges 55% to ₹952 crore 

Yes Bank is doing a job of cleaning up its business. The numbers for the December quarter are looking good. The bank made a lot of money. Its profit went up by 55% from the time last year. This is because the bank did not have to set as much money for bad loans. The banks profit is now ₹952 crore, which’s up, from ₹612 crore last year. This is an improvement and it is because the bank is not spending as much on bad loans and it is making a little more money from its main business. Yes Banks asset quality is also getting better.

The headline: Profit up 55% to ₹952 crore — driven largely by lower provisions

Yes Bank had an increase in profit in the third quarter of the financial year 2026. This was not just because they gave out loans or made a lot more money from interest. A big part of the increase came from the fact that they did not have to put as much money for bad loans. They had to set aside a lot money for this purpose compared to the previous year. According to Reuters the amount they had to set fell by about 91 percent. This means Yes Bank did not have to keep much money safe in case some loans were not paid back. As a result the net profit of Yes Bank increased. Yes Banks profit got a boost, from this.

That matters because provisions are often a stress indicator for banks. This is something that shows how well banks are doing. Provisions are like a warning sign for banks. When provisions are high it can be a sign that banks are struggling with loans. Banks have to set aside money for provisions when they think they will not get paid back. So provisions are very important, for banks.

When a bank has provisions it can mean one of two things.. The bank is finding out about new loans that are not going to be paid back or the bank is being very careful. The bank is making sure it has money set aside for bad loans, which is what provisions are for. This is the case with provisions. The bank is either dealing with bad loans or it is being extra cautious, with the loans it has.

When the provisions are falling it can mean that the losses are not as bad as they used to be. This can also mean that the company is getting better at dealing with problems. The quality of the investments is getting better too. It is also possible that the company had saved up money earlier and now that money is enough to handle any problems that come up. Falling provisions can indicate that the company is doing a job, with the portfolio quality or that the earlier savings are now working well.

In the case of Yes Bank, the people, in charge and the way they are covering things have been working on making things stable. This means that when Yes Bank makes provisions the market usually sees this as a good thing. The market thinks this way long as the quality of Yes Banks assets does not get worse later on. Yes Bank is trying to rebuild stability. The market is watching Yes Banks asset quality ratios closely.

The core banking part is doing well. The money that the bank makes from people borrowing money, which is called Net Interest Income went up by eleven percent. This is a thing because it means the bank is making more money from the loans it gives out. Also the margins, which is the difference, between what the bank pays for the money it lends and what it charges people to borrow got a bit better.

The bank had some news with lower provisions. They also did well with the money they make from loans and deposits which’s the main source of income for the bank: Net Interest Income. This is the difference, between the interest they get from loans and the interest they pay to people who put money in the bank.

The Net Interest Income grew 10.8 percent to 10.9 percent year over year to about ₹2,466 crore. The Net Interest Income of the company saw an increase. The Net Interest Income was up, by this much because of the performance of the company.

The Net Interest Margin went up a little to about 2.6%. This is what you can find in reports from Reuters and other places they all say the Net Interest Margin is, at this level.

The thing about NIM is that it really matters. Even if you make changes, to NIM people are going to notice. NIM gets a lot of attention. That is because NIM is important. When you do something with NIM no matter how small it is people will pay attention to what you’re doing with NIM.

NIM is a way to figure out how well a bank uses its balance sheet to make money. The Net Interest Margin is influenced by:

The bank makes money from loan yields, which’s what the bank earns when it lends money to people. Loan yields are basically the money that the bank gets from lending. When the bank lends money it earns something called loan yields. Loan yields are a thing, for the bank because the bank earns from loan yields.

The cost of funds is what the bank pays to people who put their money in the bank and, to lenders. This is the cost of funds.

Mix of loans (retail vs corporate, secured vs unsecured),

Mix of deposits (low-cost CASA vs term deposits).

A change from 2.5 percent, to 2.6 percent may seem small but when you are dealing with a large loan book, that little difference can make a big impact. Especially if the loan book is able to keep that rate for a long time.

Reuters also said that the bank is paying less to get people to put their money in the bank. This is because the interest rates have changed since the start of 2025. When the bank can change the interest rates it charges people to borrow money it can make money and that is good, for the bank.

Asset quality: GNPA down to ~1.5% (from ~1.6% QoQ) — steady and slightly better

The headline that says “asset quality improvement” is really talking about the banks -performing asset ratios. This is mainly what the “asset quality improvement” is, about, which is the banks non-performing asset ratios.

Gross NPA (GNPA) ratio: about 1.5%, improving from about 1.6% in the previous quarter.

A small drop of one tenth of a percent is not a lot. It helps to show that the loan book is doing okay. And that the bank does not have to put aside as much money for bad loans without being too risky. The loan book is really what matters here and this small drop is news for the loan book. It means the bank can be more careful with the loan book and still make decisions, about the loan book.

What to understand about GNPA and “improvement”

The Gross Non Performing Assets or GNPA includes all loans that people have not paid back on time and are really late. These loans are, past the deadline that the government says is okay. They are classified as non-performing loans. The GNPA has all these loans that are not doing well.

The Gross Non Performing Assets ratio improving can happen because of:

fewer new slippages (fresh bad loans),

recoveries/upgrades (bad loans returning to standard),

write-offs (removing old bad loans from books),

strong loan growth (bigger denominator), or

a combination of these.

The bank seems to be doing with its assets. They look stable or maybe a little better. This means the bank is happy to lower the money it sets aside for loans a lot this quarter. The bank appears to be comfortable enough to reduce provisions this quarter because the asset quality of the bank is stable, to slightly better.

The balance sheet is getting bigger. This is because loans and deposits have increased by an amount, around five or six percent. The balance sheet growth is a thing and it is happening because of the growth, in loans and deposits.

When a bank grows at a pace without taking on too much risk the quality of its profits gets better. Reports have shown that this is the case:

The domestic loans went up by five point two percent and

The amount of money that people put into their accounts went up by five and a half percent compared to the same time last year. Deposits really did increase by that much over the year. The deposits rose by around five and a half percent.

This is important because it shows that growth is happening. The growth is not happening too fast. If the growth happens fast it might cause problems with the risk controls. The growth is what we are looking, at here. The growth is happening at a pace that is okay.

Why deposit growth is especially crucial right now

Indian banking has been in a phase where:

system-wide credit growth at times runs ahead of deposit growth,

When banks compete with each other for deposits the term deposit rates go up. This is because the bank that offers the best term deposit rates will get the deposits from people. So the competition, for deposits is what pushes up the term deposit rates. The term deposit rates will be higher when many banks are competing for deposits.

When banks have to pay more for deposits it can really hurt the profit they make from lending money, which is known as the Net Interest Margin or NIM for short. Higher deposit costs can squeeze the Net Interest Margin. This is because the Net Interest Margin is the difference, between what banks earn from loans and what they pay for deposits. So when deposit costs go up the Net Interest Margin goes down. Higher deposit costs can really squeeze the Net Interest Margin of banks.

When a bank shows it can get deposits without paying a lot that is usually a good thing. The market likes it when a bank can improve its cost current and savings accounts also known as its CASA base. This means the bank can get money from peoples savings accounts without having to pay them too much interest. The market sees this as a sign for the bank, which is why it reacts in a good way to such news, about a banks CASA base and deposits.

Operating costs are something to think about because they can be really high.

When you have expenses that is something to watch out for with operating costs.

Even when things are going well it is important to keep costs under control. One report showed that the costs of running the business went up and this was because of a special payment that had to be made due to changes in the rules about wages. The labour code changes meant that the company had to pay more and this affected the operating costs of the business. Cost discipline is crucial for the company and the labour-code wage definition changes had an impact, on this.

For investors, the key is whether:

the cost bump is genuinely one-off, and

The costs that the company has to pay all the time which’re the underlying costs are still, under control. The company is keeping an eye on these “run-rate” costs. The “run-rate” costs are the expenses that the company has every day and they remain controlled.

Banks do not just win by earning money. They win by making sure the extra money they earn is not spent on things like salaries and other costs. Banks want to keep the money they make so they try to keep their operating expenses low. This way the extra money they earn actually helps them. Banks are careful, about how they spend their money the extra money they make.

What is different, from year is that the Profit and Loss mix is cleaner. The Profit and Loss mix of this year is cleaner compared to the Profit and Loss mix of year.

When you are reading this quarter it is an idea to separate the improvements into two groups. This way you can look at the improvements for this quarter. Really see what is going on with the improvements, for this quarter. You can put the improvements for this quarter into two buckets.

1) Structural/operating improvements (more repeatable)

NII growth (~11%)

Slightly better NIM (~2.6%)

Stable-to-improving GNPA ratio (~1.5%)

Mid-single-digit loan and deposit growth

2) “P&L accelerators” (beneficial, but must be watched)

Large fall in provisions

Provisions for loans can go up and down. They will stay low if the quality of the assets is good.. If the economy gets worse or if there are problems with the way loans are given out provisions for loans can increase a lot. This is because provisions for loans are closely tied to the state of the economy and the quality of the loans that are given out. Provisions for loans can be low for a while. Then they can suddenly go up if the economy starts to struggle or if there are issues, with the loans that have been given out.

The big question now is can Yes Bank keep its credit costs low without hurting the health of its portfolio. Yes Bank needs to make sure it does this because it is very important for Yes Bank to have a portfolio. The main thing to think about is Yes Bank and how Yes Bank will deal with this. Can Yes Bank really do it without affecting the health of Yes Banks portfolio?

The big picture is this: people are looking at this quarter in a way. The turnaround backdrop is important. We need to understand why this quarter is seen in context. The turnaround backdrop is what matters here. It helps us see this quarter in a light.

Yes Bank has taken a time to get back on track after it went through a tough time. The bank had to get money and change the way it was set up. Something big just happened with Yes Bank. A Japanese bank called Sumitomo Mitsui Banking Corporation bought a quarter of Yes Bank. This is a deal for Yes Bank and Reuters said it was an important step for the bank. Yes Bank is still working to regain trust and this investment in Yes Bank is a sign, for Yes Bank.

That stake is really important because it shows us something. It tells us a things, like:

external validation from a global banking player,

potential governance/technology/strategy support,

a stronger long-term capital and franchise narrative.

Management roadmap and succession

Reuters also said that the CEO, Prashant Kumar talked about a plan for the future of the company. He said this plan will be shared with everyone soon. The company has also started thinking about who will replace Prashant Kumar when his time as CEO ends in April 2026. Prashant Kumar and the company want to be ready, for this change.

For markets it is really important to have leaders. This is because when people are, in charge of markets they need to know what they are doing. Leadership clarity matters for markets because it helps people understand what is going on. Clear leaders make it easier for markets to work properly. Markets need leadership clarity.

The way a bank thinks about risk is really connected to the people in charge at the top of the bank. The banks risk culture is what I am talking about. This is because the top leaders of the bank have an influence, on the banks risk culture. The banks risk culture is shaped by the leadership of the bank.

When we are talking about transition uncertainty it can really affect how things get done. Transition uncertainty is a deal because it can change the way people do their jobs. Transition uncertainty can also make it hard for people to know what to do which can slow down execution. The thing, about transition uncertainty is that it can affect execution in ways.

The company makes strategy announcements that tell people what to expect from them in terms of growth, profitability and capital. These announcements are important because they set expectations, for the companys future. The company wants to make sure that people know what they are working towards whether it is growth, profitability or capital. Strategy announcements are a way for the company to share their plans with everyone.

What “improved asset quality” means for customers and shareholders

For depositors/customers

Stable and improving asset quality generally supports:

stronger balance-sheet resilience,

better ratings perception,

more comfort around the bank’s ability to fund growth.

People who put their money in the bank usually care most about the depositors. What happens to the depositors. The main thing for the depositors is that the depositors want to know their money is safe, with the depositors.

safety, service, and product competitiveness.

One quarter is not going to make a difference but if the quality of assets keeps getting better all the time people will start to feel more confident about the company over time. The quality of assets is really important. When it improves it helps to improve confidence in the company. This is what happens when the quality of assets keeps getting better it makes people feel more confident, about the company and the quality of assets.

For shareholders

Markets often reward banks that show a combination of things. These things are pretty important for banks. Markets like it when banks have some of these things all at once. Markets will reward banks that show a combination of things like being good at what they do and having a lot of money.

* Being good at making money

* Having a lot of money in the bank

* Being able to make choices about money

Markets will give these banks a lot of attention and money when they show a combination of these things. Markets, like banks that can do all of these things and do them well.

sustainable profitability (not just one-off gains),

stable NIMs,

controlled costs,

low and falling credit costs, and

clean asset quality.

This quarter is looking good in some areas like the cost of credit and the signals, from the Gross Non Performing Assets.. People will be keeping a close eye on the provisions and margins to see how long they will last. The thing to watch is if the provisions and margins of the company will stay strong.

Things that investors will look at in the few months are key metrics. Investors will want to see how these key metrics are doing over the 2 to 3 quarters. The key metrics that investors will track will tell them a lot about what’s happening. Investors will be paying attention to these key metrics to see how they change. They will look at the metrics every few months for the next 2, to 3 quarters.

If you are trying to figure out if this performance’s real and can be done again there are a few things to look for. The performance needs to be real and repeatable. These are the things to check when you are trying to judge if the performance is real and repeatable.

Slippages and recoveries

Are new NPAs forming in retail or SME?

Are the recoveries and upgrades still going on?

Credit cost trend

I am wondering if the provisions will stay at a level or if they will go back up during the next quarter. The provisions have been low for a while now so it is interesting to think about what will happen to the provisions, next quarter. Will the provisions. Will they stay low?

NIM trajectory

What is the current percentage that NIM holds is it, around 2.6%. Does NIM improve further?

Deposit mix (CASA) and cost of deposits

When you are trying to get people to put their money in your bank it is really important to have the mix of things and to be careful with your prices. The deposit market is very competitive so mix and pricing discipline are very important, for the deposit market.

Loan growth quality

I want to know which parts of the business are doing well. Are secured retail, small and medium sized enterprises and corporate sectors the ones that are growing?

Does the growth of something match the amount of risk that people’re willing to take? The question is whether the growth and the risk appetite are in line with each other. People want to know if the growth is what they are comfortable, with given the risks that come with it. Is the growth of this thing aligned with the risk appetite of the people involved?

Capital position and strategic moves

Any further capital raise, stake changes, or SMBC-related collaboration announcements?

Management roadmap details

Specific targets on ROA/ROE, cost-to-income, and portfolio mix.

Bottom line: A strong quarter, with the “quality of profit” improved by lower credit costs

Yes Banks Q3 FY26 result is really good because it is making money now. The banks assets are also looking better with an increase in Gross Non Performing Assets and a big decrease in provisions. The bank is also doing well with its business of lending and borrowing money, which is shown by the growth, in Net Interest Income and a little better margins. This means that the banks basic banking work is getting back on track. At the time Yes Banks loans and deposits are going up steadily.

The next test is whether the bank can:

keep asset quality stable (or improve it further),

hold margins in a tough deposit environment,

and sustain low credit costs without future surprises.