Exposure to ILFS sinks Yes Bank to 7 pct at Rs 1000 cr in December quarter

Exposure to the crippled infra major IL&FS Group and a heavy decline in the non-interest income have led private sector lender Yes Bank on Thursday to report a 6.96 per cent decline in its December quarter net at Rs 1,001.85 crore. Yes Bank is the third private sector lender, which are known for their better asset quality and risk management practices, to be hit by the IL&FS crisis, after IndusInd Bank and Kotak Mahindra Bank earlier this month.

This was the last earnings announcement by the bank under the leadership of managing director and chief executive Rana Kapoor, who in September last was asked by the RBI to leave office by January 31. The core net interest income grew at a healthy 41 per cent to Rs 2,666 crore primarily on a 40.9 per cent growth in assets, but non-interest income plunged 37.4 per cent to Rs 890.8 crore, impacting the bottom line.

Senior group president for financial markets Rajat Monga attributed the dip in non-interest income to treasury losses and lower corporate fees due to a rebalancing of loan portfolios. However, it was an Rs 570.89-crore provision to the IL&FS-linked accounts which hurt its bottom line the most during the quarter under review. Fortunately, an Rs 631-crore recovery from an account that slipped into NPA earlier during the quarter, led to a provision write-back and save the day for the bank.

Monga said it has provided 25 per cent for its exposure to energy and road-related assets of IL&FS Group, which has been defaulting on its debt since last August, and 15 per cent to the maritime exposure, which is standard as of now but the bank expects it to slip into NPA due to court orders. Stating that the bank's exposure to IL&FS is to operating companies and special purpose vehicles, and not to the holding company, Monga said the bank expects better recoveries in the next three to six months.

The IL&FS exposure has led it to increase its credit costs target for the fiscal to 0.80 per cent of the assets from 0.70 per cent earlier. It has already touched 0.64 per cent. Gross non-performing assets increased to 2.10 per cent of its Rs 2.4 trillion books, as against 1.72 per cent earlier.

The share of low-cost current and savings account deposits, which have been growing continuously and a key focus area for the bank, have dipped marginally to 33.3 per cent as the gains of demonetisation started wearing-off, Monga said. However, Monga exuded confidence that they will be able to claw back up its Casa ratio by 2 percentage points per quarter till it reaches its desired target of 40 per cent.

The net interest margin was stable at 3.3 per cent for the reporting period, while the capital adequacy improved to 17.4 per cent and the core tier-I at 12 per cent. Even though the bank has a sizeable exposure to the sector, the bank is unlikely to benefit much from the RBI's special dispensation to restructure MSME loans of up to Rs 25 crore, Monga said. The announcement of Ravneet Gill as Kapoor's successor led the bank scrip to rally 8.39 per cent to Rs 213.85 on the BSE, as against 0.24 per cent gain on the benchmark.