Over and above its own top management crisis, Yes Bank has a loan exposure to subsidiaries of crisis-hit group Infrastructure Leasing and Financial Services (IL&FS) worth Rs 2,620.7 crore.
The mid-size lender posted a 3.8 percent drop in net profit and disclosed that it has a gross outstanding exposure which is entirely "standard" as of September 30, 2018 as per Reserve Bank of India’s (RBI) Income Recognition and Classification norms.
"Currently these accounts are all standard. The exposures are at the lower SPVs and not at the upper IL&FS holding company levels. The SPVs each one of them will have to be dealt with their own merit in terms of what the underlying performance of the underlying asset is and at the moment we continue to be satisfied with our exposure to IL&FS which does not require provisioning," said Rajat Monga, Senior Group President, Financial Markets at Yes Bank.
SPV or special purpose vehicle is a company subsidiary that is isolated and protected from the parent company's financial risk.
Over the past two months, the debt-strapped financial infrastructure conglomerate is undergoing a liquidity crisis for defaulting on debt obligations. IL&FS group's total debt is worth Rs 91,000 crore of which banks have an exposure of Rs 57,000 crore.
Monga said that non-banking financial companies (NBFCs) will have to look at different designs of funding. "In the past few years there was more CP (commercial papers) and bond market funding. Now, the model of funding has to be rebalanced where the share of bank lending and banks buying the portfolios will be on the rise," he noted.
However, he added that Yes Bank is seeing growth in portfolio purchases from NBFCs for a competitive price at a time when the bank is also looking to grow its retail banking and small and medium enterprise (SME) banking business model.
"They are also getting better priced. The credit pricing is improving across the board and given the lack of liquidity and the situation which is certain sector specific, the opportunity to banks is tremendous right now, which is also coming at a better price," Monga added.
Yes Bank has 2.6 percent loan exposure to the NBFCs and 3.2 percent to housing finance companies (HFCs).
Total advances of Yes Bank stood at Rs 2.40 lakh crore, witnessing a growth of 61.2 percent in the second quarter of FY19 over last year.
The net profit was lower due to spike in provisions by 110 percent to Rs 940 crore, largely towards non-performing assets (NPAs) at Rs 409 crore and one-time provisions at Rs 350 crore due to rise in bond yields.
Total gross slippage into bad loans at Rs 1,631.6 crore included an account with exposure of Rs 631.20 crore classified as NPA, based on post period end review process. The bank said it expects prepayments and consequent upgrade in the account in the December quarter.
An account with exposure of Rs 445.8 crore was sold to an ARC during the quarter, the bank pointed out.
Meanwhile, the bank is searching for a successor to Rana Kapoor, who will step down as the bank's chief on January 31, 2019.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
