Yes Bank

about 7 years ago
Yes Bank

 

RBI’s provisioning norms and the ghost of Jaiprakash Industries loans have come to haunt Yes Bank. The fifth largest private sector bank showed a major fall in its asset quality for Q4FY17. Its Gross NPA jumped up to 1.56% from 0.85% (QoQ) and Net NPA rose from 0.29% to 0.81%. A very sharp jump in bad loans indeed!

It does not end there – its provisions for bad loans rose almost three times to Rs.310 crore and the bank did not mention the name of Jaiprakash but all knew that this provisioning included Rs.228 crore which was JPs.

The Bank’s MD and CEO, Rana Kapoor said, “The increase in NPA and consequent provision is in conformity with the divergences observed by the RBI as per its compliance process” mentioned in the RBI circular on Tuesday, a Yes Bank statement said. According to the RBI circular, banks have to make disclosures if their asset classification and provisioning diverge from the central bank norms.”

The Bank has said that as of 31 March 2017, the impact of divergences overall is at Rs1,040 crore on which it has made 25% provisioning. This includes one borrower exposure of Rs911 crore towards a Delhi-based cement company (JP’s cement asset sold to Ultra tech). The Bank though added that this was a performing asset which has been servicing interest regularly and it expects to recover the amount in the near term.

Barring this asset quality slump, its financial performance has actually been good – net profit for Q4FY17 was up 30% (YoY) at Rs.914 crore and NII rose 32% to Rs.1640 crore. Advances showed a 35% growth and deposits rose 28%.

Surely asset quality worry will weigh down the stock price in the stock term.

23.20 (+0.07)

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