YES Bank had begun to cut down on corporate advances, but concerns emerge about further stress

The troubled private sector lender, YES Bank, had begun to turn cautious on corporate advances as it tried to clean up its balance sheet. But analysts are concerned that more advances may have seen stress in the last quarter. A clearer picture will be available when the bank announces its third quarter results on March 14.

While, retail and other granular advances made up for the major share in advances, the bank also had significant exposure to troubled sectors like real estate, electricity and housing finance.

Amongst loans that have turned non- performing or are stressed for the bank are from companies like Dewan Housing Finance Corporation Ltd (DHFL), Jet Airways, ADAG and Vodafone. Other accounts that added stress to the bank’s books were Café Coffee Day, CG Power, Avantha Power, Altico and Cox and Kings, which had slipped into non-performing.

“Acuité estimates that on an aggregate, around Rs 55,000 crore of advances and investments of YES Bank or roughly 20 per cent have a significant element of stress and will need to be provided for,” Acuité Ratings and Research had said in a recent report.

Similarly, rating agency ICRA had said that the standard BB and below rated exposures as well as the the NPAs can increase further in the near term, given the limited resolution in these accounts and exposure to a telecom account, which has incrementally turned vulnerable.

“The BB and below rated exposures increased to Rs 31,400 crore (10.1 per cent of gross exposures) from about Rs 23,000 crore (7.1 per cent) as on March 31, 2019, partly on account of the downgrade in some of the exposures to stressed groups,” it had noted.

As per the bank’s second quarter results, YES Bank had reported a Rs 600 crore loss and gross NPAs of 7.39 per cent of gross advances.

The lender, which had once been aggressive on corporate loans, had registered a 6.3 per cent drop in its advances to Rs 2.24 lakh crore as on September 31, 2019 from Rs 2.39 lakh crore. Advances stood at Rs 2.36 lakh crore at the end of the first quarter this fiscal.

YES Bank’s MD and CEO Ravneet Gill in an investor call after the second quarter results had said that the bank registered 12 per cent shrinkage in investments and a five per cent contraction in advances quarter on quarter).

“The decline in advances was primarily led by eight per cent sequential decline in corporate advances,” he had said at the time, adding that retail business grew by 30 per cent year on year. “You clearly notice how the capital conservation strategy has actually led to an acceleration in granularity of our assets,” he had said.

The second quarter

As on September 30, 2019, retail and other granular advances amounted to 12.3 per cent of the total advances while loans to EPC sector totalled 10.6 of total advances. Its exposure to commercial and residential real estate amounted to 7.2 per cent of total advances while exposure to electricity was 6.7 per cent of total advances.

Travel, tourism and hospitality amounted to 3.4 per cent of the total advances by the end of the second quarter.

Housing finance companies amounted to 3.3 per cent of the total advances. Exposure to telecom was about 2.5 per cent.

YES Bank had said that by the end of the second quarter, it had seen material reduction in gross outstanding exposures of about Rs 2,300 crore to electricity companies, and about Rs 1,750 crores to NBFC and housing finance companies.

The bank’s corporate loan book had come down to about 62 per cent by the end of the second quarter this fiscal from a high of 68.2 per cent in the second quarter last fiscal.

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