Clean-up has Yes Bank in Rs 1,506-cr net loss as provisions

Under a new head after the forced exit of its promoter-chief executive Rana Kapoor, Yes Bank Friday reported a whopping Rs 1,506 crore of net losses for the March quarter as against a profit of Rs 1,179 crore in the year-ago period as provisions soared over nine-times. Higher provisions for possible reverses, including a massive Rs 2,100-crore contingency reserve, was the prime reason for the massive losses, the bank said.

The heavy quarterly loss crimped the full year profit at Rs 1,720 crore as against Rs 4,224 crore in FY18. Had it not been for a Rs 831-crore write-back, it would have reported higher losses for the reporting quarter. An almost ten-times spike in provisions to Rs 3,661 crore from Rs 399 crore in the year-ago period also led to the massive hit on the bottomline. This includes a contingent provision of Rs 2,100 crore. The leadership changes have often led to massive clean-ups at banks, and the practice, normally at state-run baks, has been adopted by the new managing director and chief executive Ravneet Gill.

Yes Bank also revealed 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 Rs 10,000-crore exposure to potentially stressed assets in real estate, media & entertainment and infrastructure sectors, which stands at risk, the bank management told analysts on a conference call. Overall slippages stood at Rs 3,481 crore and included Rs 552 crore to Jet Airways and Rs 529 crore for the bankrupt infra lender IL&FS.

The gross non-performing assets ratio more than doubled to 3.22 from 1.28 in the year-ago period and 2.10 in the preceding quarter. It has a 7 percent exposure to the commercial real estate sector, which is facing troubles. The bank, which closed FY19 with a credit costs of 2.19 percent due to the additional provisioning lately, is targeting to get the same down to 1.25 percent in FY20.

The bank is looking to maintain loan growth at 17-18 percent in FY20, and gradually accelerate it to 22-24 percent but will not chase the 40 percent 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 a massive management changes, saying he does not plan to destabilise the present management. However, he did say he wants the bank to be on the right side on the governance side and is making a lot of hires on that front, and is on the lookout for a head for its retail liabilities.

The core net interest income grew 16.3 percent to Rs 2,506 crore for the reporting quarter, while the non interest income stood at Rs 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 Rs 2 a share. Its overall capital adequacy 16.5 percent as of March and the board has renewed the decision to raise up to USD 1 billion in core equity in the future.

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 Rs 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 percent down at Rs 237.40 a piece on the BSE, as against a 0.87 percent rally on the benchmark.