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Yes Bank logs maiden loss on clean-up by new CEO

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Mumbai: Yes Bank on Friday reported a massive quarterly loss, amplified by provisions against bad loans to an infrastructure conglomerate and an airline, as the lender’s first non-founder CEO Ravneet Gill began a cleanup act in right earnest. The bank posted a loss of Rs 1,507 crore for the January-March quarter, compared with a profit of Rs 1,180 crore a year earlier.

This was the first loss reported by the lender since its 2004 launch. Gill, who took over on March 1 after RBI declined to sanction another CEO term to founder Rana Kapoor, forecast credit cost to remain elevated this fiscal as well.

Nearly 13.4 per cent of its loans outstanding are to vulnerable sectors such as real estate and NBFCs, he said.

The bank made total non-tax provisions of Rs 3,662 crore, more than nine times the Rs 400 crore reported a year earlier and nearly seven times the Rs 550 crore reported in December 2018, even as gross NPAs rose to 3.22 per cent of loans from 2.10 per cent in December.

This included a Rs 2,100-crore contingency provision that it made “pursuant to a review of the credit portfolio”. “In this phase of our journey, we will lay emphasis on granularity, sustainability and digitalisation while maintaining highest standards on compliance and prudence in risk,” Gill said in a statement posted on the bank’s website. More Clean-Up Expected: ExpertsAn analyst said some more clean-up could be expected in the coming quarters. “The two main exposures are to an airline company which is assumed to be Jet Airways, and (infra firm) ILFS.

The extra provisions that the company has done could mean more such shocks on the way,” said Siddharth Purohit of SMC Securities.

“We should expect a knee-jerk reaction when the bank’s shares open for trading on Monday.

It is clear that a clean-up in underway, which could be a precursor to a possible fundraising.” No executives from the bank were available to speak on the results. The bank inducted Shagun Kapur Gogia, the daughter of late cofounder Ashok Kapur, on the board as a joint nominee director of promoters Rana Kapoor and Madhu Kapur.

The board also recommended renewal of an approval for raising $1 billion of equity capital. Strong loan growthLoan growth was strong at 19 per cent, led by retail lending.

But higher expenditure, lower fee income and the record provision for non-performing assets pushed the bank to the huge net loss.

It also reversed a fee income of Rs 280 crore booked in the previous quarters for an undisclosed facility to a customer, and that also hurt the bottom line. Provisions included Rs 623 crore for loans given to ILFS to which it has a total Rs 2,528-crore exposure. The bank predicted its fiscal 2020 credit cost to increase to 1.25 percentage points from 0.8 percentage point for fiscal 2019.

It expects a “further normalisation” of the cost in FY21.




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