Yes Bank Q2 profit rises 25% despite surging bad loans
Mumbai: Yes Bank reported a sharp rise in bad loans on Thursday following the Reserve Bank of India’s (RBI’s) supervisory assessment even though profitability was in line with Street expectations.
The central bank’s assessment of Yes Bank’s gross bad loans was Rs6,355.20 crore more than what the lender had reported at the end of March.
Rana Kapoor, managing director and chief executive officer of Yes Bank, said that the regulatory exercise was completed this month and the impact of the bad loan divergence—the difference between RBI’s and Yes Bank’s NPA assessment—was recognized in the September results.
However, the entire divergence amount was not tagged as non-performing as of end September.
Out of the total divergence, 26.6% of loans were net payments while 47% of loans were upgraded as standard on account of satisfactory conduct because there was no overdue and 19.2% or Rs1,219.4 crore were classified as non-performing assets (NPAs).
Including the bad loan divergence impact, Yes Bank’s gross bad loans rose to Rs2,720.34 crore as the end of September, up from Rs916.68 crore a year ago and Rs1364.38 crore a quarter ago. As a percentage of total loans, gross NPAs to 1.82% as the end of September compared to 0.97% three months earlier.
Yes Bank’s peer Axis Bank Ltd had also seen similar jump in bad loans after RBI’s supervisory assessment. Axis Bank had reclassified nine accounts with outstanding balance of Rs4,867 crore as non-performing in the fiscal second quarter.
For Yes Bank, the rise in bad loans led to a jump in provisions. Provisions and contingencies surged to Rs447.06 crore from Rs161.67 crore a year ago. Its provision coverage ratio fell to 43.3% from 60.0% a quarter ago.
Kapoor said that the bank will work towards ensuring that the credit cost does not exceed the upper end of the guided band of 50-70 basis points for fiscal 2018. Credit cost, which is the percentage of provisioning or cover for bad loans against total advances, was at 48 bps for first half of the fiscal.
One basis point is one-hundredth of a percentage point.
Barring asset quality, Yes Bank performed well on other metrics of business.
The private sector lender reported a net profit of Rs1,002.73 crore, up 25% a year ago. A Bloomberg poll of 18 analysts had forecast the bank’s profit at Rs1,035.50 crore.
Net interest income (NII) or the core income a bank earns by giving loans, increased 33.49% to Rs1,885.09 crore. Other income was up 35.43% to Rs1,248.44 crore from Rs921.86 crore a year ago. Net interest margin was at 3.7% in second quarter. The bank grew loans 34.9% to Rs1.49 trillion.
On Thursday, shares of Yes Bank ended at Rs331.70 on BSE, up 1.24% from previous close while India’s benchmark Sensex Index rose 0.32% to closed at 33147.13 points.
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