Tuesday, May 24, 2022

Clean-up has Yes Bank in INR 1,506-cr net loss as provisions soar over nine-times

By PTI Updated: Apr 27, 2019 11:09 pm

Mumbai, April 27 (PTI): Under a new head after the forced exit of its promoter-chief executive Rana Kapoor, Yes Bank Friday reported a whopping INR 1,506 crore net loss for the March quarter as against a profit of INR 1,179 crore in the year-ago period as provisions soared over nine-times.

Higher provisions for possible reverses, including a massive INR 2,100-crore contingency reserve, was the prime reason for the massive loss, the bank said.

The heavy quarterly loss crimped the full year profit at INR 1,720 crore as against INR 4,224 crore in FY18.

Had it not been for a INR 831-crore write-back, the private sector lender would have reported higher losses for the quarter.

An almost 10-times spike in provisions to INR 3,661 crore from INR 399 crore in the year-ago period led to the massive hit on the bottomline. This includes a contingent provision of INR 2,100 crore.

Leadership changes have often led to massive clean-ups at banks, and the practice, normally at state-run banks, has been adopted by the new Managing Director and Chief Executive Ravneet Gill.

Yes Bank also revealed the receipt of a whistleblower complaint alleging irregularities in its operations, potential conflicts of interest in relation to Kapoor, and incorrect classification of bad loans, which is being probed.

“Based on the work done and the findings till date, the bank has not identified any material financial statement implications. The bank will consider the implications of the ongoing work in the current financial year on completion of the examination of this matter,” the bank said.

The contingent provisions have been taken on a INR 10,000-crore exposure to potentially stressed assets in real estate, media and entertainment and infrastructure sectors, which stands at risk, the bank management told analysts on a conference call.

Overall slippages stood at INR 3,481 crore and included INR 552 crore exposure to Jet Airways.

The bank has outstanding loan of INR 2,528 crore to various companies and SPVs of IL&FS Group. Of this, INR 2,442.05 crore has been classified as NPA with specific provision of INR 610.51 crore (25 per cent).

The gross non-performing assets ratio more than doubled to 3.22 per cent from 1.28 per cent in the year-ago period and 2.10 per cent in the preceding quarter. It has a 7 per cent exposure to the commercial real estate sector, which is facing troubles.

The bank, which closed FY19 with credit costs of 2.19 per cent due to the additional provisioning, is targeting to get the same down to 1.25 per cent in FY20.

The bank is looking to maintain loan growth at 17-18 per cent in FY20, and gradually accelerate it to 22-24 per cent but will not chase the 40 per cent growth levels that it has done in the past, Gill told analysts, stressing that the focus will be on following a calibrated growth model.

Gill also denied reports that the bank under him was attempting massive management changes, saying he does not plan to destabilise the present management team.

However, he did say he wants the bank to be on the right side of governance and is making a lot of hires on that front. It is also on the lookout for a head for its retail liabilities.

The core net interest income grew 16.3 per cent to INR 2,506 crore for the reporting quarter, while the non interest income stood at INR 529 crore.

The management conceded that there was a “decision- making slowdown” due to leadership changes during the reporting quarter and added it is business as usual now.

Despite the losses in the quarter, the bank board recommended a dividend of INR 2 a share.

Its overall capital adequacy was 16.5 per cent as of March and the board has renewed the decision to raise up to USD 1 billion in core equity in the future.

In a separate filing, Yes Bank said its board has approved raising funds up to INR 20,000 crore, in Indian or foreign currency, by issue of debt securities.

Kapoor had to leave office in January after his tenure was cut short by RBI, following the discovery of under-reporting of NPAs for two consecutive years by a cumulative INR 10,000 crore.

Gill, who used to head German lender Deutsche Bank’s India business, took charge as the head on March 1.

The bank scrip closed 0.13 per cent down at INR 237.40 apiece on the BSE ahead of the results announcement.

By PTI Updated: Apr 27, 2019 11:09:08 pm