YES Bank CEO says coronavirus created problem on loan book, very difficult to estimate impact

By: |
October 26, 2020 12:34 PM

The coronavirus outbreak has created a problem on the loan book, even as progress has been made on fixing key drawbacks such as weak governance, fund-raising challenges and declining deposits.

yes bank, coronavirus, losses, bank loss, NPA, loan bookYes Bank returned to profit in the quarter ended September and Prashant Kumar made provisions for potential covid-related losses. (Bloomberg image)

The chief executive officer of Yes Bank Ltd., who helped the lender emerge from India’s biggest-ever bailout, is girding for fallout from the pandemic. The coronavirus outbreak has “created a problem” on the loan book, even as progress has been made on fixing key drawbacks such as weak governance, fund-raising challenges and declining deposits, Prashant Kumar said in a phone interview Saturday.

It’s “very, very difficult to estimate the impact,” Kumar said. “With the fundamental issues taken care of, we want to control costs and increase profit to deal with any adverse impact on the credit due to the pandemic.” Yes Bank returned to profit in the quarter ended September and Kumar made provisions for potential covid-related losses. When regulators seized the lender in March, its depositors had been fleeing and the bank was struggling to attract investors. State Bank of India bought a stake in Yes Bank and Kumar was plucked from the government-controlled lender to lead the turn around.

Shares in Yes Bank gained as much as 5.3% in pre-market trade on Monday, the most in more than four months. They were trading 1.8% higher at 9:37 a.m. in Mumbai, compared with a 0.2% decline in the main banking gauge.

Key Numbers:

  • Yes Bank reported net income of 1.3 billion rupees ($17.7 million) in the three months ended Sept. 30, compared with a 6 billion rupee loss a year earlier
  • It set aside 19.2 billion rupees as covid-related provisions
  • Gross bad loan ratio was 16.9%, versus 17.3% three months earlier
  • The bank posted a profit of 454.4 million rupees in the three months ended June 30, compared with 1.14 billion rupees a year earlier.

His predecessor, Rana Kapoor, who co-founded Yes Bank in 2003 and built it into India’s fastest-growing lender, was forced out by the central bank in 2018 amid a dispute over reporting of bad debts.“The market wasn’t even sure how much rot was still in the loan book,” Kumar said. He decided to play it safe and cover 75% of credit for potential losses. However, just days after he took the helm, India announced the world’s strictest lockdown to contain the coronavirus.

Kumar pressed on with his plan. He raised about $2 billion of additional equity capital in July, enough for two years, albeit at as much as a 55% discount to the market price. To bolster governance he separated departments that originate loans, assess risk and resolve stressed assets. Kumar also set aside an hour each day to personally call depositors and assure them of Yes Bank’s stability.

Deposits have swelled by nearly 30% to 1.36 trillion rupees in the six months ended September. Kumar aims to raise it to 2 trillion rupees by March 2021. The loan book for retail customers and small businesses hasn’t weakened despite the pandemic, he said.

Kumar’s goal for now is to limit costs and create a cash cushion to absorb any unforeseen deterioration in asset quality. He said he wouldn’t want to dip into precious capital and identified a delayed return on assets as the biggest risk.

Seven months since Kumar began turning around Yes Bank, he’s now calling partial victory. “Things have dramatically changed,” Kumar said. “I’m having a good sleep.”

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1RBI plans scale-based regulatory approach for NBFCs
2‘RBI ensures ample liquidity to support growth; rate cuts unlikely as inflation remains sticky’
3RBI’s external trade facilitation measures to encourage exports: FIEO