Yes Bank is in hot water over lending to beleaguered financier Altico Capital
by Sandhya Krishnan Yes Bank is yet to find light at the end of the tunnel as far as payment defaults on loans to realty financiers goes. Previously the IL&FS; collapse, and the recent Altico ‘liquidity crisis’ have yet again sent the share prices of Yes Bank tumbling down, with an estimated loan exposure of Rs 450 cr. News of a potential 9.6% stake buy by One97 Communications aka Paytm previously caused share prices to jump 13.5%. However, the deal is yet to come through. Yes Bank has been in the news for the wrong reasons for a while now, with RBI directing Rana Kapoor, co-founder to step down as CEO following differences over bad-debt accounting practices. Quick takes: Moved out of the red to turn profitable in Q1FY20. PAT stood at Rs 113.76 cr, recovering from huge losses of Rs 1506.64 cr in Q4FY19. PAT slumped 91% yoy. Net interest income dropped 2.8% (3.3% in Q1FY19) to touch Rs 2281 cr. This was attributable to Rs 223 cr interest reversals from account slippages Decline in CASA deposits to Rs 68135 cr and a reduced ratio of 30.2% in Q1FY20, compared to 35.1% in Q1FY19. Retail liabilities stabilized at 58.4% (56.7% as of Q1FY19). Retail loans comprised 36.1%, with corporate loans making up the balance 63.9% of advances as of Q1FY20 Absorption of MTM provisioning losses of Rs 1109 cr owing to a rating downgrade on NBFC investments. Jump of 185% in provisioning to Rs 1784.1 cr as of Q1FY20 Advances registered a 10.1% YoY growth to a size of Rs 236,300 cr, with retail advances growing at a robust 43.3% YoY. Bank to continue its retail focus in FY20. Deposits clocked a marginal 5.9% YoY growth to stack up to Rs 225,902 cr. Retail TDs increased by 37.7% YoY, making up 28% of total deposits. Maintained an average Liquidity coverage ratio of 117.3% and provision coverage ratio of 43.1% (target: 60%) Risk weighted assets was Rs 3.23 lakh cr as of Q1FY20 Sold an NPA amounting to Rs 411 cr to an ARC Credit cost of 32bps in Q1FY20. Management is hopeful of containing it within guidance figures of 125bps in FY20e. Credit deposit ratio settled at 104.6% as of Q1FY20(100.6% as of Q1FY19) Q1FY20: Picture not all rosy, with declining NIM, deteriorating asset quality Yes Bank aspires to be a leader in digital banking, launching the first CP issuance via blockchain in Asia. The bank commands a 40% market share by value in digital payments with 768 mn UPI transactions as of Q1FY20. However, several chinks in the armor need to be addressed, especially with regard to asset quality deterioration. This is evident from the fresh advance slippages amounting to Rs 6232 crore, and write-offs to the tune of Rs 340 crore in Q1FY20. GNPA ratio touched 5.01% and NNPA ratio stood at 2.91% as of Q1FY20. Rs 2500 crore of slippages is from previously defined watch list of Rs 10,000 crore while the remaining was from BB and below. Additionally, the drop in CASA deposits ratio and higher NPAs has hit the NIMs. While the yield on advances was dormant on YoY basis at 10%, the cost of funds registered a 50 bps YoY hike to 6.8% in Q1FY20. As a transparency measure, the RBI Deputy Governor attended the board meeting online. Sluggish loan growth was largely attributable to growth reversal of 13% YoY in MSME segment and corporate lending. The management foresees the growth capital infusion to be completed by Q2FY20. With declining credit growth and subdued deposit growth, the earnings might be strained. The bank is sitting on Rs 29,470 cr loans (caused by 2 financial services companies, categorized as sub investment grade) in the BB and below book category has grown from 7.1% to 9.4% QoQ. While troubles on the asset quality front, sub-optimal credit exposure and limited capital continue to plague the banking system as a whole, Yes Bank’s problems are aggravated owing to its restricted cushion, both by way of profitability as well as capital cover, to overcome defaults of such magnitude. While, public sector banks have borne the brunt of the bad loans burden, estimated at over $200 billion, they have Government backing, with timely capital infusion and bank mergers to sail through rough weather. This is a luxury ill- afforded by mid-sized private sector lender Yes Bank.19-09-2019
