As was largely feared, Yes Bank’s Q3FY19 performance was marred by its significant exposure to the IL&FS group. Business growth though was solid amid myriad negative news flow.
The growth in net interest income (the difference between interest income and expenses) was a healthy 41.2 percent aided by advances growth of over 42 percent and stability in interest margin at 3.3 percent.
Non-interest earnings dropped mostly due to treasury loss (corresponding offsets through provision write-backs) and lower corporate fees.
While operating expenses grew in line, the lower non-interest earnings led to a spike in the cost to income ratio to 44 percent.
Pre-provisioning profit stayed flat at Rs 1,990.5 crore.
Provision for the IL&FS account was Rs 570.8 crore, with Rs 478.3 crore for NPA and Rs 92.5 crore for standard assets. A significant Rs 240.9 crore provision reversal mainly on account of investments saved the bottomline that grew by a paltry 3.9 percent YoY.
Deposit growth was a healthy 29.7 percent although the CASA share fell marginally.
There was a significant deterioration in asset quality, thanks to a large slippage on account of IL&FS. Of the total slippage of Rs 2,297 crore – close to Rs 1,913 crore was on account of IL&FS. Consequently, the ratio of Gross NPA rose sequentially to 2.1 percent from 1.6 percent. Net NPA rose from 0.84 percent to 1.18 percent resulting in a decline of provision cover to 44 percent.
Total stressed exposure of the bank (including NPA, restructured and security receipts) stood at 1.96 percent of assets of which close to 0.59 percent was contributed by IL&FS.
The bank has funded exposure of Rs 2,530 crore and non-funded exposure of Rs 88 crore to the IL&FS group. Close to 76 percent of the exposure has slipped to NPA in this quarter where the bank carries 25 percent provision. 24 percent of the exposure, which is standard carries a provision of 15 percent. Hence, on a blended basis, the bank carries 22.5 percent provision against its funded exposure to IL&FS.
In the days to come, the direction of IL&FS resolution (that will determine the final hair cut for each lender) along with a change of guard with the new foreign-banker MD will be the key drivers of the stock.
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Source: Moneycontrol
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