Yes Bank Q1 Results: Profit More Than Halves, Net Interest Income Declines
Police officers observe customers standing in line outside a Yes Bank Ltd. branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Yes Bank Q1 Results: Profit More Than Halves, Net Interest Income Declines

Yes Bank Ltd.’s profit fell by more than half and core income declined in the first full quarter affected by the coronavirus pandemic.

The bank’s net profit fell 60% year-on-year to Rs 45.4 crore in the April-June period, according to an exchange filing. Analyst tracked by Bloomberg had forecast a loss of Rs 2,836 crore.

Its net interest income, or core income, fell 16.3% year-on-year to Rs 1,908 crore during the reported quarter. That compares with the estimated Rs 1,827 crore.

Provisioning & Asset Quality

Yes Bank's asset quality worsened slightly during the quarter. Its gross non-performing asset ratio rose to 17.3% from 16.8% in the preceding three months. The net NPA ratio, however, fell to 4.96% from 5.03% in the quarter ended March.

The bank did not disclose the share of loans under moratorium as of June.

The lender also saw provisions for bad loans decline during the period. Provisions stood at Rs 1,086.6 crore compared with Rs 1,784.1 crore a year ago. That is much lower than the Rs 4,872-crore set aside by Yes Bank in the quarter ended March, as the bank strengthened its balancesheet after a reconstruction plan was approved for the stressed lender.

In the April-June period, the bank made Rs 642 crore worth additional provision to cover for an potential losses owing to the Covid-19 pandemic. Cumulative Covid-related provisions now stand at Rs 880 crore.

The bank now have a provision coverage ratio of 75.1%.

According to details shared by the bank in its analyst presentation, in September 2019, three third party consultants had conducted due diligence on Rs 81,000 crore in corporate loans on the bank’s asset book. As per their assessments the consultants believe that Rs 55,500 crore worth loans can be recovered at minimum, implying losses worth Rs 25,500 crore, the bank said.

Against these exposures, the bank has already made provisions, including technical write offs, worth Rs 33,000 crore.

Advances & Deposits

The bank, which saw a sharp fall in deposits in the quarters preceding its reconstruction saw some stability return in the June-ended quarter.

Total deposits rose 11.4% sequentially to Rs 1.17 lakh crore. The lender’s CASA ratio stood at 25.8%. Current account deposits rose 26% during the three month period, while savings account deposits fell 1%. Term deposits rose 13%, led by a 30% increase in certificates of deposits.

Loan advances fell 4% quarter-on-quarter to Rs 1.64 lakh crore.

“In the June quarter, we saw more repayments than disbursements. There was also a conscious decision not to increase our loan book rapidly for now. Going ahead, as the economic activity picks up, we will be pushing up our lending,” said Prashant Kumar, the bank’s chief executive officer.

Capital & Liquidity Position

Earlier this month, the private bank raised Rs 14,267 crore through a follow-on public offer, raising funds from investors including State Bank of India, Life Insurance Corporation of India, SBI Life Insurance Co., Punjab National Bank, Union Bank of India, Edelweiss, U.S.-based investor Tilden Park and HDFC Standard Life Insurance Co., among others.

As a result, the bank restored its capital adequacy ratio to above the regulatory minimum. The bank’s tier-1 capital ratio now stands a 13.5% and its total capital adequacy stands at 20%.

In its notes, the bank said that it has fully repaid the previous special liquidity facility availed from the RBI and was granted another line of Rs 50,000 crore from the RBI on June 15, 2020 for a fixed period of 90 days. “The bank has repaid an amount of Rs 25,000 crore of this special liquidity facility till date.” Its liquidity coverage ratio stood at 114 % as at June 30, 2020.

Ongoing Investigations

The bank also disclosed that certain loan accounts, where Yes Bank has exposure, are under investigation by the Central Bureau of Investigation, Enforcement Directorate and Serious Frauds Investigation Office, on the basis of a forensic audit report submitted by other lenders.

The law enforcement agencies are investigating allegations of money laundering, fraud and nexus between the founder and former MD & CEO of the bank and certain loan transactions. On the basis of issues highlighted in forensic audit report, Yes Bank has reported a certain group as fraud case, the lender said without specifying the account.

The bank also conducted an external inquiry into allegations by Uttam Prakash Agarwal, former head of the bank’s audit committee in January 2020. While the allegations were largely proven to be false, the bank has sought detailed recommendations from the external agency to strengthen corporate governance.

Shares of Yes Bank closed 3.25% lower ahead of the results, while the benchmark BSE Sensex ended trade 1.4% up.

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