Private sector lender, Yes Bank has posted 58% growth in terms of year on year (y-o-y) in profits for Q2 of this fiscal.

This growth in its profits can be attributed to the 86% y-o-y rise in its advances. Also the low base of the bank in September quarter has been responsible to some extent for this rise.

The founder and chairman of the bank, Rana Kapoor has said that sectors such as infrastructure, engineering, construction, healthcare and hospitality will aid in increasing its loan book for the second half of FY11. The RBI has hiked policy rates twice during the second quarter of this fiscal. With low CASA ratio of the bank, the cost of borrowing of the bank would rise as an impact to the rate hike.

The bank has almost doubled its deposit base in Q2. This was mainly attributed by the application supported by blocked amount (ASBA) deposits received by the bank for initial public offers.

Thus, inspite of the fact that improved asset quality and capital cushion may aid in the bank achieving a bigger loan book, the bank may still face challenges in growing its retail arm in a smooth manner using this strategy.