Q2 Results: Yes Bank Reports Rs 600-Crore Loss On One-Time Tax Adjustment
Yes Bank Ltd. slipped back into loss in the quarter ended September as bad loans spiked and the private lender made a one-time tax adjustment.
Net loss stood at Rs 600 crore compared with a profit of Rs 964.7 crore a year ago, according to an exchange filing. Analysts tracked by Bloomberg had estimated a loss of Rs 402 crore.
Net interest income, or core income, of the bank fell 9.6 percent year-on-year to Rs 2,185.9 crore, in line with the Rs 2,127-crore estimate.
The higher loss was due to a one-time direct tax asset adjustment of Rs 709 crore as the bank chose to change its rate of income tax to 25.1 percent from 34.9 percent under the new corporate tax rate structure. The re-measurement of accumulated deferred tax resulted in the exceptional charge.
The bank’s asset quality deteriorated further during the quarter.
Gross non-performing asset ratio rose to 7.39 percent from 5.01 percent in the preceding quarter. In absolute terms, bad loans rose 41 percent to Rs 17,134 crore. Slippages, or fresh bad loans, during the quarter stood at Rs 5,945 crore. About 10 percent of the bank’s loan book now falls in the BBB-rated and below category. Half of the slippages during the quarter came from this book.
Provisions fell 25 percent quarter-on-quarter to Rs 1,336.3 crore. In its notes, Yes Bank said that from a pool of Rs 2,100 crore in floating provisions created in March, the lender has used Rs 1,339 crore had been used.
Post provisions, net NPAs, too, increased 140 basis points sequentially to 4.3 percent.
At the start of the financial year, the bank’s management had given a guidance of 125 basis points in terms of credit costs. Given the events of the last six months, the bank could exceed credit cost guidance by up to 125 basis points, chief executive officer Ravneet Gill said in a conference call after the earnings release. This would take the credit cost to 225-250 basis points, the bank’s senior management said.
“Unbudgeted and unexpected credit events in cases like CG Power, Cox & Kings, Cafe Coffee Day and Altico Capital, along with delays in resolution of two cases are adding to our credit cost reassessment,” Gill said.
Out of the net slippages worth Rs 5,100 crore, nearly Rs 2,000 crore worth bad loans came from outside Yes Bank’s BB and below rated book.
Adding these recent cases, the bank’s BB and below rated book now stands at around Rs 31,000 crore. About 25 percent of this book runs the risk of being classified as NPA, Gill said. However, there is no risk of the BB or below rated book expanding further, he added.
The bank saw a drop in advances and deposits.
Advances fell 5 percent over last year to Rs 2,24,505 crore. Retail advances grew 30 percent and now account for 20 percent of the loan book.
Deposits fell 7 percent to Rs 2,09,497 crore.
The bank, in its press release said that the ratio of current account and savings account deposits, stood at 30.8 percent in the second quarter compared to 30.2 percent at the end of the first quarter. In absolute terms, CASA deposits stood at Rs 64,525 crore at the end of Q2 compared to Rs 68,222 crore at the end of Q1.
The higher-than-expected loss comes a day after Yes Bank received a binding offer for an investment worth $1.2 billion from a global investor as part of its fundraising efforts.
The funds would be raised through an issuance of fresh equity shares, the private lender informed the exchanges on Thursday. The bank also continues to be in talks with other potential investors, it said.
While staying silent on the name of the potential investor, Gill told analysts that the investor is one who has the financial ability to provide the requisite capital and has the backing of a large U.S. financial institution.
A fresh round of capital raising, if concluded, will come as a relief to the bank, which has faced both financial and regulatory pressure.
Last year, the Reserve Bank of India turned down a request for an extension of founder-chief executive officer Rana Kapoor’s term. His shareholding in the bank has since fallen to below 1 percent. Ravneet Gill, who took over as CEO in March 2019, has been trying to clean up the bank’s books.
Shares of Yes Bank closed 5.46 percent lower ahead of the results, compared with a flat Sensex.