Yes Bank Braces For More Stress In Corporate Loan Portfolio

Yes Bank Ltd. is not ruling out a continued rise in stressed assets, said Chief Executive Officer Prashant Kumar. This would mean the private sector lender will have additional stress to contend with even as it tries to clean-up the existing pool of bad loans.

“If we see on the corporate side, the overdue book is around Rs 7,500 crore. We are working on each of these loans to see that they don’t slip or end up in restructuring. But at this time it is difficult to predict. We are also not ruling any loans outside this pool which may go for restructuring,” Kumar told BloombergQuint in an interview.

He did not disclose the amount of loans seeking resolution under the Reserve Bank of India’s Aug. 6 circular, where the regulator allowed one-time restructuring for Covid-19 affected borrowers.

As on Sept. 30, Yes Bank had reported gross non-performing assets of Rs 32,344 crore on its book, representing 16.9% of total advances. The number came down marginally from the Rs 32,703 crore reported as on June 30. Additionally, it disclosed Rs 9,000 crore in loans which were overdue by more than 30 days, including the Rs 7,500 crore in corporate loans.

The pool of overdue loans includes Rs 2,391 crore in advances that were not classified as NPAs due to a Supreme Court interim order that prevented lenders from downgrading asset classification after Aug. 31.

The key overhang, which is asset quality, still remains for the bank, analysts at ICICI Securities said in a report on Monday. These concerns are far from over and have been merely deferred (due to moratorium/restructuring benefit). This is reflected in labelled stress exposure at 25% of advances, ICICI Securities said.

The brokerage firm is estimating a cumulative credit cost of over 5% for Yes Bank, till March 31, 2022.

In the quarter ended Sept. 30, Yes Bank also reported investments worth Rs 11,690 crore in corporate debt instruments, 54% of which are classified as non-performing. The bank’s estimates of recovering Rs 5,000 crore from these investments during this financial year might spill over to the next year due to the impact of the pandemic, Kumar said.

Business Growth & Cost Control

Even as it battles asset quality concerns, Yes Bank will aim to disburse up to Rs 10,000 crore to retail and small business borrowers in the October-December quarter, Kumar said.

“Even during the second quarter, under the impact of the pandemic, we were able to disburse Rs 6,000-6,500 crore toward retail and MSME. This quarter we will disburse a minimum of Rs 10,000 crore,” he said.

The private bank will focus on segments such as consumer loans, mortgages, vehicle loans, business equipment and construction to expand its loan distribution.

In the July-September period, Yes Bank’s outstanding deposits stood at Rs 1.35 lakh crore, up 15.7% quarter-on-quarter. Outstanding retail term deposits rose from Rs 48,000 crore to Rs 59,800 crore sequentially. “Our efforts on CASA (current account savings account) deposits will continue. But because of the very peculiar position of the bank, we do not want to discourage term deposits,” Kumar said.

Yes Bank has so far kept deposit rates high in order to ensure that an already weak deposit base does not deplete further. But it may now look at cutting rates. “Now the time has come for us to reduce our deposit rates so that we can have some balancing between the asset and liabilities side of our balance sheet. At the same time we will be able to reduce our cost of deposits,” Kumar said.

In September, the bank opened 60,000 new CASA accounts and it now aims to add at least 1 lakh customers every month, he added.

As part of its efforts to improve operational efficiency, Yes Bank will continue with overall cost control measures, Kumar said. On a quarter-on-quarter basis, operational expenditure dropped 5%, which helped the bank post a healthier operating profit and a cost-to-income ratio of 49.3%, lowest in five quarters.