YES Bank pins hopes of economic recovery even as slippages rise

CEO Prashant Kumar said he expects the economy to recover faster this fiscal amidst the second wave of Covid led by faster vaccinations which will help Yes Bank also step up on lending.

This even as fresh slippages of Rs 12,000 crore which were under wraps due to the Supreme Court (SC) ordered moratorium on NPAs forced the bank to provide more and slip to a loss after a reporting a profit in the quarter ended December 2020.

Yes Bank’s losses widened year on year due to higher provisions to deal with an increased post moratorium slippages and interest reversals after the SC order last month. Provisons increased one and a half times to Rs 5240 crore in March 2021 from Rs 2199 crore in December and was up 7.5% from Rs 4872 crore a year ago as the bank set more money aside to cover for the fresh slippages accumulated during the fiscal.

The bank made a Rs 3788 crore loss in the quarter ended March 2021 from a Rs 3668 crore in the same quarter last year. The bank had made a Rs 151 crore profit in the quarter ended December 2020.

Net interest income (NII) fell 23% to Rs 987 crore from Rs 1274 crore a year ago as strong growth in retail and SME loans could not make up for reversal of interest due to the SC order directing banks not to charge compounded interest on loans under moratorium in the first six months of last fiscal. The fall in NII was more acute versus the quarter ended December as it fell 62% from Rs 2560 crore. The bank had to reverse close to Rs 900 crore of interest income as it recognised the slippages in the last quarter and reversed interest.

Net interest margins fell to 1.6% from 1.9% a year ago and 3.4% in December 2020 also due to these reversals.

CEO Kumar however expressed confidence of faster recovery next fiscal due to growth in retail and SME loans and lower slippages next year.

“We expect a 15% loan growth next fiscal led by retail and SME segments which will grow at 20%. Even the corporate loans which have degrown this year will increase 10%. This along with growth in CASA ratio beyond 30%, cost efficiencies and bad loan recoveries will help us grow,” Kumar said.

Retail loans grew by 23% year on year in the fourth quarter. Together disbursements for retail and SME loans at Rs 12,150 crore was at a record high even as corporate loan book shrunk.

Gross NPAs at 15.41% of total loans was lower than 16.80% a year earlier but inched up compared to 15.36% in December. The bank made Rs 4933 crore of recoveries from more than 100 large and small accounts during the whole year and has targeted a Rs 5000 crore number for the next fiscal.

“We expect cash recoveries to beat Rs 5000 crore and slippages to be below that number next fiscal which will help our profitability. Our loans due from 31 days and above are down 21% since the last quarter which gives us confidence on asset quality,” Kumar said.

The bank has restructured Rs 2500 crore of loans under the RBI mandated scheme and made a 10% provisioning on these loans of Rs 250 crore.

Non interest income increased 37% year on year led by fees from retail banking to Rs 816 crore from Ts 597 crore from a year earlier though lower than Rs 1197 crore in the quarter ended December 2020.

Operating expenses declined 8% to Rs 1618 crore in March 2021 and 14% year on year in line with the bank’s focus of keeping costs under check.

Kumar said that the bank expects to grow its transaction banking and fee income faster next year and will also step up in lending to companies selectively.