Analysts say that some of these accounts availing moratorium could very well have turned defaulters in the ordinary course of business, but the moratorium delays recognition by a few months.
Yes Bank continued to lose deposits for the quarter ended March 31, as a rescue act by the regulator and the banking system and also the installation of a new management team seemingly did little to restore confidence of depositors.
The bank’s current account savings account (CASA) balances slid 63% year-on-year (y-o-y) and 47% sequentially to Rs 28,063 crore at March end. The CASA ratio, too, fell to 26.6% at the end of March from 33.1% a year ago and 32.1% a quarter ago. Term deposits also fell 49% y-o-y to Rs 77,301 crore as on March 31. The bank tried to make up for this loss by raising certificates of deposit (CDs), which shot up 348% y-o-y to Rs 6,935 crore.
The bank will have to stem the outflow of deposits for any revival strategy to be effective and to do that the bank has to regain the trust.
The maximum outflow of deposits happened between March 18 and 31, bank’s MD & CEO Prashant Kumar said in conversation with FE.
He added that it was a tough task to restore depositors’ confidence, but the number of retail fixed deposits the bank originated in April was higher than that added during any month in FY20. Yes Bank remains optimistic about being able to resume deposit accretion and targets raising its CASA ratio to above 40% over the next three years.
Outflow of deposits is a cause of worry and market experts believe that the current environment will make things more challenging. “There is little room for them to build deposits and continue to function like this. Over the next six months or so, it could become a wholesale bank or be merged into some other bank,” a banking analyst said.
Most broking firms have stopped tracking Yes Bank, after crisis broke at the capital starved bank late last year.
There could also be landmines on the asset quality front even as the bank continues to provide for existing bad loans. Yes Bank has made full provisions worth Rs 3,980 crore against its exposure to a mortgage financier. It has taken a 53% provision against its Rs 5,127-crore exposure to a diversified conglomerate.
Yet fresh stress could get camouflaged at the bank through the March-May loan moratorium that the regulator has allowed banks to offer. At Yes Bank, up to 45% of corporate and retail accounts (in value terms) have applied for the moratorium. The share of MSME accounts applying for it stands at 40%. The share of retail customers (in absolute terms) who have applied for the moratorium stands at 25% — significantly higher than the average 10% that some other banks have reported so far. Further, MSME loans account for 20% of the bank’s loan book and these accounts could be particularly vulnerable amid a nationwide lockdown.
Analysts say that some of these accounts availing moratorium could very well have turned defaulters in the ordinary course of business, but the moratorium delays recognition by a few months. In other words, Yes Bank is not quite out of the woods even on the credit quality front.
The liabilities piece, however, remains a key monitorable for Yes Bank. While upgrading the bank on March 17, rating agency Moody’s had written, “A worsening of the bank’s fundamentals due to an increase in asset risk or a significant outflow of deposits after the RBI’s moratorium is lifted resulting in lower recovery rates for the bank’s creditors, could lead to a further downgrade of the bank’s ratings.”