YES Bank posts first-ever quarterly loss of Rs 1,507 cr on IL&FS, Jet loans

Private lender YES Bank posted its first quarterly loss, of Rs 1,507 crore, during the January-March 2019 period on account of a fall in non-interest income and a sharp increase in provisioning for bad loans, mainly due to defaults by the Infrastructure Leasing & Financial Services (IL&FS) group and Jet Airways. It had reported a net profit of Rs 1,179 crore in the fourth quarter of FY18.

For the full year, the bank's net profit more than halved to Rs 1,709.3 crore from Rs 4,233 crore in 2017-18.

The bank’s results, the first under new Managing Director and CEO Ravneet Gill, were declared after an eight-hour long board meeting on Friday. Gill in a conference call with analysts said the bank would no longer be chasing the high growth targets of the past but would focus on consistent calibrated growth.

Gross non-performing assets (NPAs) as a percentage of gross advances soared to 3.22 per cent as of March 2019, compared to 2.1 per cent as of December 2018 and 1.28 per cent as of March 2018.

The bank saw slippages of Rs 3,480 crore during the quarter, of which Rs 552 crore was from an “airline company” and Rs 529 crore from a “stressed infrastructure conglomerate”.

YES Bank’s total exposure to IL&FS stood at Rs 2,528 crore as of March 31, 2019, of which Rs 2,442 crore has been classified as NPA. “Rs 86 crore continues to be classified as ‘standard’ and the bank has a provision of 15 per cent against this standard exposure,” said the bank in a statement.

About probe into whistle-blower complaints, the bank said it was conducting an internal enquiry into allegations about operational irregularities, incorrect NPA classification, and conflict of interest in relation to former MD and CEO Rana Kapoor. It has not identified any material financial impact so far.

The bank has also appointed Shagun Kapur Gogia, a nominee of the Madhu Kapur camp, and Ravinder Kumar Khanna additional directors on the board. “We will be focusing on a higher standard of compliance to gain the RBI’s validation and I am sure we will receive that soon,” Gill told analysts.

The bank’s provisions stood at Rs 3,662 crore for Q4 FY19 and at Rs 5,778 crore for FY19. This also included contingent provisions of Rs 2,100 crore against an identified stressed book of Rs 10,000 crore.

Net interest income (NII) for the quarter, which is interest earned less interest expended, grew 16.3 per cent to Rs 2,506 crore in Q4 FY19 as against Rs 2,154 crore in the year-ago quarter. The bank’s net interest margin declined to 3.1 per cent in March 2019 as against 3.4 per cent in the March 2018 quarter.

Non-interest income at Rs 532 crore for March 2019 fell by 62.6 per cent year-on-year. The fall was mainly due to low corporate banking fees on account of one-time reversal of Rs 280 crore and calibrated corporate growth, said the bank.

The bank’s management said it would make accounting changes for corporate fees, which would bring in an element of deferment of corporate fee recognition along the term of the loan given. The bank’s total capital adequacy ratio stood at 16.5 per cent with common equity tier-1 of 8.4 per cent as of March 2019.

The bank’s board approved raising debt up to Rs 20,000 crore and equity capital up to $1 billion (about Rs 7,000 crore), subject to approval from shareholders. The bank has not specified the time frame for raising capital. Its advances grew by 18.7 per cent year-on-year to Rs 2.42 trillion in FY19, while deposits grew by 13.4 per cent to Rs 2.27 trillion.