Yes Bank hid Rs 6,355cr NPAs in FY17,Q2 PAT up 25% to Rs 1k cr

Midsize private sector lender Yes Bank today said its September quarter net grew 25 per cent to Rs 1,002 crore, but reported a massive increase in dud loans with the Reserve Bank finding it to have under-reported NPAs in the last fiscal by Rs 6,355 crore.
The bank's stock of non-performing assets (NPA) ratio more than doubled to 1.82 per cent of total loans, wrecked by the RBI's risk based supervision (RBS) finding a divergence or under-reporting of Rs 6,355 crore of assets which should have been classified as NPA.
This is the third straight year where the regulator has found a divergence in the bank's NPA classification. While figures for financial year 2015-16 are not available as it was not mandatory to disclose them then, the divergences for FY16 and FY17 go to nearly Rs 11,000 crore.

The bank's managing director and chief executive Rana Kapoor called it as a "temporary setback" in asset quality and said that it has recognised the entire stress in Q2 numbers.
He added only 19 per cent of the FY17 divergences which relate to 19 accounts majorly in the infrastructure or the related sectors are NPAs, and over the past six months, 47 per cent of the loans have started paying, 27 per cent have been repaid in full and 7 per cent have been sold to asset reconstruction companies.
The NPA stock because of the divergences is only Rs 1,219 crore. This was the primary reason for increase in the NPA ratio during the reporting quarter and also in the provisions for bad assets, which soared to Rs 447 crore from Rs 1621 crore.

The bank's provision coverage ratio slid to 43 per cent from the historic 60 per cent levels and Kapoor justified the level, saying the bank feels recoveries are possible.

The spike in provisions, however, led to question marks over whether the banks will be able to meet its credit costs guidance of 0.50-0.70 per cent for the figure. Even though it has already incurred 0.48 per cent in costs, Kapoor said the attempt will be contain the costs within the upper end of the target.
Of the 19 assets where divergence was observed, three have been sold, 12 have been upgraded while four remain as NPA, Kapoor said, stressing that the bank will work hard to contain the damage.

Except the restructured book, the bank also reported a surge in assets on other regulatory instruments of tackling asset quality stress like S4A, SDRs, 5:25 and security receipts.
The bank has seven accounts in the new list of assets classified to be resolved under the provisions of the insolvency code, in addition to the two assets in the first list of a dozen accounts.
The total exposure to insolvency-related accounts is Rs 1,434 crore, Kapoor said.
The RBI seems to have already finished the RBS exercise for FY17, as lenders starting with Axis Bank (nine accounts) have started reporting divergences. Largest private sector lender ICICI Bank is scheduled to announce its Q2 numbers tomorrow.

Kapoor said the bank has shown resilience in springing back from such difficulties in three previous episodes --- two instances of discovery of divergences and the impact of the asset quality review --- and exuded confidence of coming out safely a third time as well.
The bank has cured 80 per cent of the divergences pointed out in the past, he claimed, adding that there is no reason to believe that such shocks are a "recurring" item.
"The earning momentum is very well conditioned to absorb this impact," he said, pointing out to the September quarter numbers.
The bank's core net interest income grew 33.5 per cent to Rs 1,885 crore on a 0.3 per cent expansion in margins to 3.7 per cent and 35 per cent credit growth, non-interest income was up 35.4 per cent to Rs 1,248 crore.

A 6.9 per cent jump in the share of the low-cost current and savings account deposits to 37.2 per cent also helped with the margins.
The cost to income ratio came at 39.2 per cent and Kapoor said the bank will narrow it down further to 35 per cent between 2022-2025.
Its core equity capital levels dipped to 11.4 per cent, well above the regulatory requirements, as of September 30 from the 11.9 per cent three months ago, but Kapoor asserted that the bank will not have to access the markets for two more years despite the drain from the surge in dud loans.

Results were delayed to after market hours and the scrip closed the session 1.24 per cent up at Rs 331.70 a piece on the BSE, as against a 0.32 per cent surge in the benchmark.