Yes Bank Q4 Results: Net Loss Widens To Rs 3,788 Crore

Yes Bank Ltd. posted a wider-than-expected net loss for the quarter ended March, a year after the private lender was rescued by the banking regulator.

The lender’s net loss stood at Rs 3,788 crore compared with a net loss of Rs 3,668 crore a year ago, according to its exchange filing. Analysts estimates compiled by Bloomberg had pegged the net loss at Rs 495 crore.

Yes Bank was placed under a moratorium in March last year after which a reconstruction scheme was implemented.

Its net interest income fell 22% year-on-year to Rs 987 crore, compared with the Rs 2,176-crore forecast. Other income, however, rose 36.6% to Rs 816 crore in the fourth quarter.

Asset Quality

Gross non-performing asset ratio stood at 15.41% in the reported quarter. In the preceding three months, Chief Executive Officer Prashant Kumar had said the bank’s pro-forma gross NPA ratio was close to 20%. It had reported a gross NPA ratio of 15.36% as of December 2020.

• During the quarter, the bank set aside Rs 5,239.6 crore in provisions to cover for bad loans, which in turn led to the large loss.

• Post provisioning, the Net NPA ratio was at 5.88% compared with 4.04% as of December. The bank had not released its pro-forma net NPA at the end of the third quarter.

“The bank has made accelerated provisions against non-performing loans and investments, which led to the loss during the quarter,” said chief executive Prashant Kumar in a media call after the earnings. The bank’s provision coverage ratio stands at 78.6%.

• The bank wrote-off Rs 10,300 crore during the quarter.

• Gross slippages during the quarter stood at Rs 11,873 crore.

• Out of the gross slippages in Q4, nearly Rs 8,200 crore worth of slippages were accounts which were not classified as NPA in the third quarter due to a Supreme Court order.

• Loans worth Rs 1,112 crore were restructured, including Rs 940 crore in corporate loans and Rs 13.5 crore in retail loans.

• The bank expects to restructure Rs 2,500 crore in the first quarter of the current year.

Including technical write offs, the provision coverage ratio of the bank stood at 78.6% as of March 31, marginally higher than 78% a year ago, but lower than 81.5% as of December 31.

In the current financial year, the bank expects cash recoveries of Rs 5,000 crore, with slippages coming in lower, the CEO said.

Kumar said that the bank’s plan to set-up a majority owned asset reconstruction company has not been approved by the Reserve Bank of India. The lender will await the new ARC guidelines before submitting a revised plan. The structure had been considered as a way to clean-up the bank’s balance sheet.

“We feel that this is a business opportunity for the bank as we have the necessary expertise within the bank. We would like to pursue this as a business opportunity where we don’t just address the asset quality of Yes Bank but also on the rest of the industry,” Kumar told BloombergQuint in a post-earnings interview.

The bank, he said, will continue to pursue an ARC structure where it has the ability to appoint management, rather than depend on the bad bank which the banking industry is currently working on.

“The aggregation of the assets itself would not resolve the case. Unless you understand the asset it would take very long to resolve it. We already have that kind of understanding internally. We feel that instead of transferring the asset to such a large entity (national ARC proposed by the banking industry), we would either resolve it internally or transfer it to an ARC where we have our people managing the affairs,” Kumar said.

Advances & Deposits

• Total advances for the bank dropped 3% year-on-year to Rs 1.67 lakh crore as of March 31.

• Retail loans grew to nearly Rs 50,000 crore at the end of the fourth quarter, as compared with Rs 40,755 crore a year ago.

• Retail and MSME loans now account for 51% of the total loan book.

“In the current year we are aiming for a 15% overall loan growth, led by a 20% growth in retail and MSME advances. We are looking making our portfolio more granular. We will also grow our corporate book selectively, with a focus on providing more working capital loans to companies,” Kumar said.

• As of March 31, the bank’s outstanding deposits stood at Rs 1.63 lakh crore, up 55% year-on-year.

• Low cost current account savings account deposits contributed 26.1% of the deposit portfolio.

Last year the bank’s deposit base had taken a hit, after it went through a period of financial turmoil ahead of the rescue plan by RBI.

According to the business plan shared by the bank in its investor presentation, it aims to double its deposit base and triple its customer base by March 2024. It will leverage high quality business segments such as government business and capital market custody business to widen its liabilities franchise. Yes Bank plans to increase the CASA ratio to 40% in the next three financial years.

Capital Comfortable

The bank’s capital adequacy ratio fell to 17.5% at the end of March as compared with 19.6% as of December 31. This included common equity tier-1 ratio of 11.2% at the end of the last fiscal, as compared with 13.1% in the third quarter.

This was largely because of elevated provisioning and credit costs during the quarter, said Kumar. With cash recoveries rising higher than expected slippages, the bank expects its current capital adequacy to cover for any immediate growth needs.

“At the start of the first quarter this year, we have 300 basis points of CET-1 ratio over regulatory minimum. If there are better growth opportunities in the times to come, then we would not want to miss out on them. We will take a call on fund raising as the situation evolves,” Kumar said.

The bank last raised Rs 15,000 crore through a follow-on public offer in July 2020 and has board approvals to raise another Rs 10,000 crore.

Watch the full interview here: