Yes Bank Plans Large Capital Raise By June 

Private lender Yes Bank Ltd. is looking to raise up to Rs 15,000 crore by June 30, Prashant Kumar, chief executive officer of the bank, told BloombergQuint. The bank will try to raise the entire amount in one tranche, if the market allows it, he said.

Yes Bank, which reported fourth quarter earnings on Wednesday, is still falling below regulatory capital requirements. The bank’s common equity tier-1 or CET-1 ratio is at 6.3 percent compared to the minimum requirement of 7.375 percent.

To bridge this gap, the bank is targeting a fund-raise from investors other than those who contributed capital as part of the lender’s reconstruction scheme in March.

“As a strategy we would like to diversify our investor base. We may look at a combination of FPO (follow-on public offer) and QIP (qualified institutional placement). We would be very happy if we are able to raise the entire Rs 15,000 crore, but if not that, we would look at raising at least Rs 10,000-12,000 crore,” Kumar said in an interview.

The bank is currently in talks with institutional investors and will get its fund-raising process started soon, Kumar said.

For the January-March quarter, Yes Bank reported a net profit of Rs 2,629 crore after it wrote-back Rs 8,415 crore in additional tier-1 bonds. According to Kumar, the bank continues to hold AT-1 bonds worth about Rs 285 crore on its balance sheet. The bank will continue to raise Tier-2 bonds to replace the Tier-1 bonds which were written off.

Did Depositors Stay With Yes Bank

In the run-up to Reserve Bank of India’s decision to impose a moratorium on the bank, the lender had seen an outflow of deposits. A cap of Rs 50,000 was imposed on deposit withdrawals between March 5-17.

Did the bank continue to lose deposits?

Between September 2019 and December 2019, the bank’s total deposits fell from Rs 2.09 lakh crore to Rs 1.65 lakh crore. By March 31, the deposit base had further reduced to Rs 1.05 lakh crore and then Rs 1.02 lakh crore by May 2.

The bank, however, did not disclose the break-up of changes in retail deposits between March 31 and May 2.

“What we saw is that the deposits after March 31 have largely stabilised. We have seen that large corporates have also started coming back to us. The bank added the highest amount of retail deposits in the current quarter, compared to what we have been able to do in the past,” Kumar said. He declined to share the exact amount of retail deposits the bank added.

From here on, the bank will aim to grow its low-cost current account and savings account deposits. It will, however, reduce the relatively high interest rate of 5-6 percent offered on savings account deposits in the past given the current environment, Kumar said. “In the current environment, I don’t think anyone can afford to pay the higher rates on CASA deposits.”

As on March 31, the bank’s CASA deposits constituted 26.6 percent of total deposits.

Shrinking The Corporate Loan Book

Yes Bank has also shrunk its loan book.

The total loan portfolio fell to Rs 1.71 lakh crore as on March 31 from Rs 2.41 lakh crore a year ago. Domestic corporate loans fell to Rs 81,660 crore from Rs 1.39 lakh crore in the same period. Retail loans inched up marginally to Rs 40,755 crore in the fourth quarter, from Rs 40,305 crore in March 2019.

According to Kumar, the bank will continue to focus on growing the retail loan portfolio by 20 percent year-on-year, while the corporate loan book is likely to see more sell-downs. As of now, retail loans and exposures to micro, small and medium enterprises make up about 44 percent of the total loan book.

Yes Bank expects the current level of provisions to be adequate to deal with any further delinquencies on the corporate loan side. The bank’s provision coverage ratio stood at 74 percent on March 31. Gross non-performing assets dropped to Rs 32,828 crore from over Rs 40,000 crore in the December quarter, mostly due to write-offs of loans against which 100 percent provisions have been made.

The bank has classified 63 percent of its corporate investment portfolio as non-performing investments. According to Kumar, the bank holds 74 percent provisions against these investments, which represents the ‘loss given default’ rate of these securities.

The bank will look to exit these investments as soon as it sees an uptick in their value, Kumar said.

Impact Of Covid-19

During the March quarter, the RBI allowed banks to offer a three-month moratorium to term loan borrowers.

About 15-20 percent of its corporate and MSME borrowers by number availed this relief. In case of retail borrowers, the number was higher at 20-25 percent. According to Kumar, it is likely that these borrowers may not be able to pay their dues once the moratorium ends on May 31.

The banking industry has not only sought an extension on the moratorium but has also requested the RBI to avoid capitalising the interest charged to the customer during the moratorium period, he said.