India's Yes Bank reports surprise 80% plunge in quarterly profit

Employees enter a Yes Bank branch at its headquarters in Mumbai

MUMBAI (Reuters) - India's Yes Bank reported a surprise 80% plunge in quarterly profit on Saturday as provisions for bad loans increased.

Net profit fell to 515.20 million rupees ($6.36 million) for the three-months ending December 31, from 2.66 billion rupees in the year-earlier period. Analysts had expected profit to rise to 3.36 billion rupees, according to Refinitiv IBES data.

The net interest margin, a key indicator of a bank's profitability, rose 10 basis points in the third quarter to 2.5%.

The bank's asset quality improved as gross non-performing assets declined to 2.02% of total loans, from 12.89% in the previous quarter. Net non-performing assets declined to 1.03% from 3.60%.

The bank also aims to recover around 10 billion rupees in the current quarter, Chief Executive Prashant Kumar said in a call on Saturday.

Net interest income, the difference between the interest income from lending and that paid to depositors, rose 11.7% to 19.71 billion rupees. Provisions increased to 8.44 billion rupees from 5.82 billion rupees the previous quarter.

Yes Bank in December completed the transfer of bad loans worth 480 billion rupees to private equity firm J.C. Flowers, in a deal aimed at cleaning up its balance sheet.

The lender's loan growth improved by 10% while deposits rose 16%.

Kumar is confident that the bank will be able to achieve 15% full-year credit growth while he expects overall deposit growth in a range of 16%-17%.

As the scramble for deposits increase, the bank believes that it may not be able to achieve its target on low-cost current and savings account deposits (CASA) in this financial year, which it aimed to increase to 35%.

CASA deposits fell to 29.9% in the third quarter, compared with 31% in the previous three months.

($1 = 80.9790 Indian rupees)

(Reporting by Nupur Anand and Siddhi Nayak; Editing by William Mallard and Mike Harrison)