The net interest income, which fell 31 per cent year-on-year (YoY) to Rs 1,274 crore in Q4, was far inadequate to absorb Rs 4,872 crore of provisioning cost. While provisioning for bad loans has come off significantly from December’s Rs 24,766 crore, it suggested the need for more stress recognition.
The gross non-performing assets (NPA) ratio stood at 16.8 per cent, 200 basis points lower sequentially. The silver lining is the slippage ratio, or loans turning bad, halving to 5.74 per cent in Q4, indicating the new management may have been accurate in identifying stress. That said, the management said the current operating condition may see the slippage ratio increase to 8-9 per cent in FY21 (earlier projection was 5 per cent), thereby eating into capital.
What’s equally concerning is the run on deposits. SBI's lending support may not have helped YES Bank.
Q4 marked the third consecutive quarter of deposit outflow; down 36 per cent sequentially to Rs 1.05 trillion. The share of low-cost current account–savings account (CASA) deposits plunging to 26.6 per cent positions YES Bank
unfavourably among peers.
In all, as the auditors mentioned, comfort on the YES Bank stock hinges on Kumar's ability to bring in Rs 15,000 crore of capital quickly. Analysts at Credit Suisse say increased uncertainty in the current environment adds to risk aversion, and liquidity will remain a challenge for smaller private banks.
Until then, investors should avoid buying the stock.