Yes Bank Q3 net plummets 79% on provision hit; will appeal AT-1 ruling in SC

Yes Bank reported a 79% dip in its consolidated December quarter net at ₹55.07 crore

Yes Bank reported a 79% dip in its consolidated December quarter net at ₹55.07 crore on Saturday as provisions on legacy bad assets made it set aside higher amounts as provisions.

The private sector lender also announced that it will appeal against the Bombay High Court’s order in the ₹8,400-crore AT-1 bonds case of 2020, saying it has strong legal grounds to do the same.

It reported an 11.7% jump in the core net interest income at ₹1,971 crore on the back of a 10% advances growth and a 0.10% expansion in the net interest margin at 2.5%.

Its non-interest income jumped 55.8% to ₹1,143 crore and was largely helped by a ₹100 crore sale of corporate bonds received as part of a dud loan resolution.

The overall provisions shot up to ₹845 crore from the ₹375 crore in the year-ago period, which the bank’s chief executive and managing director Prashant Kumar explained as ageing of legacy bad assets-related.

If one were to add the net non-performing assets and security receipts, there is still an outstanding of Rs 5,746 crore which the bank is carrying that may require more ageing-related provisions in the future, he said.

The transfer of a bulk of its bad assets to J C Flowers asset reconstruction company resulted in the gross non-performing assets ratio dropping to 2% from the over 13% level in the quarter-ago period.

The gross slippages stood at ₹1,610 crore for the quarter, including ₹962 crore on the corporate side and ₹549 crore on the retail front. Mr. Kumar said corporate slippages will fall to ₹300-500 crore per quarter going forward.

The bank has recovered over ₹4,300 crore of loans till now, and with an additional ₹1,000 crore expected in the last quarter, is all set to exceed the FY23 guidance of ₹5,000 crore in recoveries, Mr. Kumar said.

On the loan growth front, the retail segment led with a 43% growth, while the same was 19% for small and medium enterprises, 34% for mid-corporate and an 18% de-growth in the corporate segment despite over ₹7,500 crore in the fresh disbursements.

Mr. Kumar said the bank is maintaining its 15% loan growth target for FY23 and will like to focus on growing profitably now that the bad assets have been transferred and it has received a capital infusion from Carlyle and Advent.

The bank will not be able to achieve its near-term target of upping the current and savings account deposits at 35% of the base and is likely to maintain the same ratio at 30%, Mr. Kumar said.

On the setback from the Bombay High Court on the extinguishing of AT-1 bonds at the time of the bank bailout in March 2020, Mr. Kumar said the bank has received legal opinion pointing to strong grounds to post a challenge.

He said the Bombay HC has only put question marks over the process of writing down the perpetual bonds, and not questioned the regulatory guidelines on carrying out such a process.

The bank has got immediate relief from the Bombay High Court which has given six weeks time for it to appeal, for which time the order will be in abeyance, Mr. Kumar said, adding that it has not set aside any money as provisions because of the setback either.

He also made it clear that the remaining part of the capital infusion from Advent and Carlyle to come via warrants will happen despite the HC order.

The overall capital adequacy had stood at 18% as on December 31, 2022.