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The setting up of an asset reconstruction company (ARC) and transfer of bad loans would be completed at the latest by the first quarter of 2022-23 and the entity would eventually look at buying stressed assets across the banking industry, said Prashant Kumar, Managing Director and CEO, YESBank.
The private sector lender would be able to fully focus on growth and technology, he said, adding that the bank was already on a growth trajectory and asset quality issues were a thing of the past.
The purpose of the ARC was not just to take care of the non-performing assets (NPAs) of YES Bank, he said. “We want to have a very creditable platform to take care of the bad assets of the banking industry. We are not looking for the short term so we have a stake in the ARC. We would like to drive it as a good business opportunity,” Kumar told BusinessLine after the third quarter results of the bank were announced.
YES Bank will hold 20 per cent stake in the proposed ARC and has shortlisted about four prospective investors. The due diligence is underway.
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For the quarter ended December 31, 2021, the bank reported a standalone net profit of ₹266.43 crore“We are trying to complete this process by March 31. There are challenges in terms of following the process, getting the regulatory approval. So, it may shift to the next quarter – maybe in April or May,” Kumar said.
‘Near-zero NPAs’
The bank will transfer about ₹50,000 crore of bad loans to the ARC and hopes to have near-zero NPAs on its books.
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The bank has reported an 18.8 per cent jump in its December quarter consolidated net profit to ₹6,536.55 crore“We are already moving on the growth path. With almost nil NPAs, all our ratios would improve. Today, there is a drag from the net NPA. If you take the net NPA out, our net interest margin would automatically improve from 2.4 per cent to about 2.8 per cent. So, all ratios would look good optically; then there would not be any issue in terms of ageing provision,” Kumar explained.
The management would be able to focus on business strategies rather than spending time and money on recovery, NPA customers and litigation.
“The bank would be able to focus on growth, especially on the technology side, where we are very strong. We will be able to come up with new offerings,” he said.
YES Bank reported a 76.8 per cent growth in net profit for the third quarter of the fiscal to ₹266.43 crore, as against ₹150.71 crore a year ago.
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