NPA mess continues to daunt Yes Bank

Mumbai: Yes Bank expects pressures from sour loans, which led it to declare the highest loss for any private sector lender at Rs 18,654 crore for the December quarter, to continue even in FY21, but CEO-designate Prashant Kumar is confident of its survival after a Rs 10,000-crore capital infusion.

Yes Bank's gross non-performing assets (GNPA) were at Rs 40,709 crore as against Rs 17,134 crore for the quarter ended December 2019 and net NPA was at 5.97 percent versus 4.35 percent.

The bank's gross NPAs shot up to 18.87 percent in the given quarter as against 2.10 percent in the year-ago period and 7.39 percent in previous quarter.

The bank witnessed withdrawals of over Rs 72,000 crore of deposits in the last six months to Rs 1.37 lakh crore, but the Rs 10,000 crore capital infusion, coupled with over 1,000 branches and a strong customer base makes Kumar confident of Yes Bank continuing to be a 'going concern.'

"The proposed capital infusion and the bank's strong customer base and branch network will enable the Bank to continue its business for the foreseeable future, so as to be able to realise its assets and discharge its liabilities in its normal course of business," the bank said, quoting Kumar's assessment.

Kumar is at present the bank's RBI-appointed administrator and will be taking over as CEO on Wednesday evening once the bank comes out of moratorium.

The heavy reverses on corporate lending -- nearly a third of the overall loans have turned sour -- have probably led the new management led by Kumar to earmark focus on retail and small business loans as a priority going forward, according to its investor presentation.

The bank has also made it clear that additional-tier 1 bonds of over Rs 8,500 crore will have to be written-down completely for the reconstruction to begin, setting the stage for a legal battle.

Kumar had to be installed as the administrator of the bank on March 5 by the RBI, after the government superseded its board due to an inability to raise much-needed capital.

Much of the troubles at the bank are attributed to the alleged mishandling by its co-founder and former chief executive Rana Kapoor, whose term was cut short by the RBI due to governance lapses.

Under Kapoor's successor Ravneet Gill, it began an accelerated recognition of the stress hidden in the balance sheet, which started with reporting its maiden quarterly loss in March 2019.