Yes Bank Q2 profit slips 32% on higher provisions

MUMBAI: Yes Bank on Saturday reported a 32 per cent dip in September quarter net profit at Rs 153 crore, as legacy bad assets come to haunt the private sector lender, resulting in higher provisions.

The bank, which had to undergo an unprecedented bailout because of the high quantum of bad loans and is now on the way to normalization, had reported a post-tax profit of Rs 225 crore in the year-ago period.

Its core net interest income jumped 31.7 per cent to Rs 1,991 crore during the quarter on the back of 11 per cent growth in loans and 0.40 per cent expansion in net interest margin at 2.6 per cent.

The non-interest income increased 18.2 per cent to Rs 920 crore in the quarter. The bank reported a 13 per cent growth in deposits for the quarter when compared to the year-ago period, but its chief executive and managing director Prashant Kumar told reporters that garnering deposits will be a challenge going forward as the liquidity in the system gets tighter.

He also said there is a higher propensity among depositors to move money into term deposits, due to which it may not be able to achieve the 35 per cent target share from the low cost current and saving account deposits by end of the fiscal year.

In the comments that come amid what is being described as a war for deposits by some bankers, Kumar said Yes Bank can raise deposits by hiking rates but made it clear that it will not do so until it gets takers for loans after making a spread. He also guided that there will not be any compression in the NIM because of its moves on deposit mobilization.

It has raised Rs 1,000 crore from the floating interest deposit rate product introduced recently but Kumar opined that it has not been able to market the product well.

The bank reported a fall in the fresh slippages at Rs 893 crore as against Rs 1,072 crore in the preceding June quarter and Rs 1,783 crore in the year-ago period, which helped reduce the gross non performing assets ratio to 12.89 per cent from 13.45 per cent in June quarter and 14.97 per cent in the year-ago period.

However, the legacy bad assets came back to haunt its financial performance for the quarter, resulting in higher ageing-related provision of Rs 750 crore from two accounts alone.

The bank management said provisions for fresh slippages were only Rs 183 crore, while there were reversals of Rs 1,100 crore during the quarter. The ageing-related issues can continue for up to four years more, but there is no looming threat for the remainder of the fiscal year.

The ageing-related provisions will continue even after the bank transfers the Rs 48,000 crore of dud assets to asset reconstruction company J C Flowers as part of a recently announced deal, which will take the GNPA ratio down to 2 per cent, Kumar said, adding that the deal with J C Flowers is expected to finish by December.

On the loan growth side, it hopes that it will grow faster on the retail and small businesses front and expects large corporate loans – which de-grew by 18 per cent – to grow slower, Kumar said.

The overall capital adequacy stood at over 17 per cent with the core tier-I at over 11 per cent. Kumar said the nearly Rs 9,000 crore infusion from private equity funds Carlyle and Advent is expected to happen by December.

The Yes Bank scrip had closed 0.63 per cent up at Rs 16.05 on the BSE on Friday, as against gains of 0.18 per cent on the benchmark.