Yes Bank likely to post heavy quarterly loss on weak business, high provisions

Yes Bank


New Delhi

Private sector lender Yes Bank under the new management is expected to report heavy quarterly loss again due to fall in business growth and higher provisions.

Kotak Institutional Equities expects the bank to post around Rs 4,400 crore of loss during the quarter ended March 2020, while the Emkay sees loss at around Rs 7,568.2 crore for the quarter.

The bank had reported a loss of Rs 1,506.6 crore in March quarter 2019 and loss of Rs 18,559.6 crore in December quarter 2019.

According to brokerages, net interest income (the difference between interest earned and interest expended) may decline around 60 per cent compared to the year-ago quarter due to weak loan growth.

"We expect outstanding loans to decline around 40 per cent YoY and similar trend on deposits. There is likely to be an increase in pressure on NIM (interest income de-recognition). Revenue pressure will be high also due to weak fee income (sharp decline)," Kotak said.

The Reserve Bank of India took over the Yes Bank management during the quarter and put it under a moratorium on March 5 which prompted some depositors to withdraw their deposits when the bank has been struggling for liquidity.

Then the central bank lifted the moratorium on Yes Bank on March 18 and handed the charge to new board members. Prashant Kumar is the new MD and CEO of the bank.

SBI, HDFC, Axis Bank, ICICI Bank, Kotak Mahindra Bank, Bandhan Bank, Federal Bank and IDFC First Bank invested Rs 10,000 crore in Yes Bank.

Brokerages expect further weakness in asset quality and elevated slippages in the quarter ended in March 2020.

"We expect asset quality ratios to see further deterioration (lumpy corporate exposure)," said Kotak which sees provisions rising 91 per cent YoY.

According to Emkay, slippages could remain elevated as the bank may continue to recognize stress from its pool.

Commentary from the management on capital raising, the progress of 'below investment grade' and deposit profile would be key things to watch out for.


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