Yes Bank NPAs will continue till FY21, but CEO-designate upbeat

The bank witnessed withdrawals of over Rs 72,000 crore of deposits in the last six months to Rs 1.37 lakh crore, but the Rs 10,000 crore capital infusion, coupled with over 1,000 branches and a strong customer base makes Kumar confident of Yes Bank continuing to be a “going concern”.

“The proposed capital infusion and the bank’s strong customer base and branch network will enable the Bank to continue its business for the foreseeable future, so as to be able to realise its assets and discharge its liabilities in its normal course of business,” the bank said, quoting Kumar’s assessment.

Kumar is at present the bank’s RBI-appointed administrator and will be taking over as CEO on Wednesday evening once the bank comes out of moratorium. the heavy reverses on corporate lending – nearly a third of the overall loans have turned sour, have probably led the new management led by Kumar to earmark focus on retail and small business loans as a priority going forward, as per its investor presentation. The bank has also made it clear extra-tier 1 bonds of over Rs 8,500 cr will have to be written-down completely for the reconstruction to begin, setting the stage for a legal battle. The bank told investors it expects slippages to be at 5 pc of the assets in FY21. The assets decreased by 22 per cent to Rs 2.90 lakh crore at the end of December 2019, against the year-ago period.

Compared to the preceding quarter, advances overdue for 31 to 90 days (levels before they get tagged as NPAs), declined to Rs 13,911 crore. The higher slippages and a reduction in loan book were key reasons for the 60 pc decline in the core net interest income at Rs 1,065 cr, and also narrowing of the net interest margin to 1.4 pc from 3.3 pc a year ago.