Questions have been raised on the actual state of stress on private lender Yes Bank’s corporate NPA (non-performing assets) book ever since the fraud-hit bank’s hurried bail-out by the State Bank of India (SBI)-led consortium a year ago. Those questions even now remain largely unanswered.
The numbers on the asset quality in the January-March quarter of 2021 are worrying. If not for the massive loan write off, the NPA number would have been possibly higher. The net NPAs, or NPAs post provisions, jumped to 5.88 percent at the end of March 31, compared with 4.04 percent in the December quarter.
High provisions have understandably hurt its earnings. Interest income has fallen. The provision coverage ratio, or the ratio of money set aside against NPAs, has fallen to 78.6 percent in Q4 from 81.5 per cent in the preceding quarter.
What do these numbers mean?
The bank’s survival story continues to be the headache of its deep-pocketed rescuers. Yes Bank has managed to raise funds (it raises Rs 15,000 crore through a follow-on offer) because of the backing of SBI and other promoter banks and it will need more money. “They will need more time and capital to work through the asset quality issues,” said a leading banking analyst in Mumbai. The analyst declined to be named saying he has stopped covering the bank. As this analyst said, it will require a lot more capital to cover its stress. Early this year, the bank got shareholders’ nod to raise Rs 10,000 crore capital. Massive write-offs mean a good chunk of the capital will go for provisions.
Looking at the segmental NPA breakup corporate loans continue to dominate 90 percent of the total NPAs (Rs 25,946 crore out of Rs 28,610 crore) followed by retail (Rs 1,489 crore) and SME (Rs 784 crore). In line with Supreme Court Judgement and RBI Circular dated April 7, 2021, the bank has classified borrowers as per the extant IRAC norms, pursuant to which the gross slippages stood at Rs 11,873 crore in Q4.
Provisions and contingencies for Q4, FY21 came in at Rs 5,239.6 crore, up 7.5 percent as compared to the year-ago quarter. On a sequential basis, the figures witnessed a massive jump of 138.3 percent to Rs 5,239 crore from Rs 2,198 crore. Net interest income, the difference between interest earned and interest expended, plunged 22.5 percent to Rs 986.7 crore during the quarter under review as compared to Rs 1,273.70 crore in the year-ago quarter.
Advances for the quarter at Rs 1.66 lakh crore declined 2.7 percent year-on-year (YoY), with net interest margin falling 30 bps YoY (down 180 bps QoQ) to 1.6 percent in Q4FY21, Deposits grew significantly by 54.7 percent YoY to Rs 1.62 lakh crore during the quarter ended March 2021. The bank’s retail loan book towards the total, which stood at 28 percent in December 2020 has improved to 30 percent at the end of the March quarter.
Except improvement in deposits (which indicates some return of depositor confidence) and some loan segments, there is nothing really to cheer about in Yes Bank's Q4 numbers.
What now?The actual state of Yes Bank’s NPA book will require more clarity. The outlook ahead appears even more challenging in the context of COVID. Yes Bank has its own set of legacy problems. Its new promoters may have to bring in a lot more money to support the bank. The COVID second wave will likely make the recoveries even more difficult. For sure, the bank is not past its worst phase yet.