The new board of private sector lender YES Bank, which will take charge soon, will have its task cut out given the huge non-performing assets, erosion in deposit base and de-growth in income streams at the beleaguered bank.

YES Bank reported a huge net loss of ₹18,560.30 crore in the third quarter of the current fiscal as against net profit of ₹1,001.85 in the same period a year ago.

Deposits declined by ₹71,991 crore between September-end 2019 and March 5, 2020. YES Bank’s Independent Auditor cautioned that its financial stress and actions taken by the RBI may have an impact on depositor confidence.

Clean-up act

It is evident that the RBI-appointed Administrator Prashant Kumar, who is also the designate MD and CEO, decided to start a clean-up of the bank’s balance-sheet to ensure that it can re-start operations with a clean slate.

Kumar also seemed confident that with capital infusion and the bank’s strong branch network and customer base it will continue to be a going concern.

“Considering the impact on the bank's profitability, liquidity and capital…, the bank's Administrator has made an assessment of its ability to continue as a going concern based on the projected financial statements for the next two years and is satisfied that the proposed capital infusion and the bank’s strong customer base and branch network will enable it to continue its business for the foreseeable future,” YES Bank’s quarterly results pointed out.

The moratorium on the troubled bank will cease at 6 pm on March 18 and the reconstituted board of the bank, which now consists of veteran bankers, will then take over.

Way forward

According to its investor presentation, the bank seems to be keen on moving out of corporate lending and focus more on retail segment which now stands for over 20 per cent of its advances.

“Reduction in corporate advances is in line with the bank’s capital optimisation and liquidity management strategy,” it said, adding that the strategy is to reduce exposures in sectors including commercial real estate, NBFC, HFC, infrastructure and electricity.

According to the auditor’s notes, the bank is also aware that the breach in its capital ratiomay trigger Prompt Corrective Action (PCA) by the RBI.

Q3 performance

For the quarter ended December 31, 2019, YES Bank reported gross non- performing assets of 18.87 per cent of gross advances and net NPAs of 5.97 per cent. Provisions shot up to ₹24,765.73 crore in the quarter under review.

Its gross slippages stood at ₹24,587 crores during the quarter and its provision coverage ratio increased to 72.7 per cent. The bank expects slippages to be at five per cent of the assets in the next fiscal and expects slippages to normalise in 2021-22.

YES Bank’s total income declined to ₹6,268.50 crore in the October- December 2019 quarter compared with ₹8,849.81 crore in the same period last fiscal. Net interest income fell 60.1 per cent to ₹1,065 crore while non-interest income declined nearly 30 per cent to ₹626 crore.

IDFC First Bank invests

Meanwhile, IDFC First Bank has joined the seven other lenders that have invested in YES Bank as part of the restructuring scheme. In a regulatory filing on Sunday, it said that it will invest ₹250 crore in YES Bank and buy 25 crore equity shares.

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