Yes Bank’s Prashant Kumar: Covid has created problem on loan book, very difficult to estimate impact

By: |
October 25, 2020 11:04 AM

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.

Yes Bank, SBI, Yes Bank has fully repaid the 50,000 crore provided by RBI, special liquidity facility, SLF, Yes Bank chairman Sunil Mehta, default, yes bank management, yes bank bailout packageYes Bank reported net income of 1.3 billion rupees (17.7 million dollars) in the three months ended Sept. 30

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.

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

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.

Also read: Risk averse banks continue to lend with caution; bank credit up marginally, deposit growth stable

“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
1Why traditional banks need to partner with fintech firms for delivering essential banking solutions
2Paytm to not charge any fee on wallet payments for merchants; move to benefit 1.70 crore users
3Let us declare NPAs, banks to Supreme Court; govt pleads against sector-specific relief