Yes Bank's profitability to remain under strain for 12-18 months: Moody's

YES Bank Photo: Reuters
Global rating agency Moody’s today said the profitability of private sector Indian lender Yes Bank will remain under strain for the next 12-18 months as it provides for the stressed loans.

The country’s fourth largest lender booked a net loss of Rs 1,500 crore for the quarter ended March 2019, the first financial loss since its inception in 2004. The loss was driven by higher credit costs incurred non-performing loans (NPLs) and the creation of a contingent provision against a pool of identified stressed assets.

Its provision coverage ratio, at 33 per cent of total stressed loans, is significantly lower than the loss-given default experience of other Indian banks. The coverage includes existing provisions for NPLs, provisions for standard assets and contingent provisions for stressed assets, Moody’s said in a statement.

The bank's overall stressed assets are about eight per cent of its gross loans, taking into account this new disclosure. This includes reported NPLs of 3.2 per cent of gross loans, net standard restructured loans and security receipts of 0.8 per cent of gross loans, and the classified BB-and-below rated exposure of about four per cent of gross loans.

The bank is profitable on a full-year basis. Its return on assets was 0.5 per cent in the fiscal year ended March 2019 (FY19) as against 1.4 per cent in fiscal 2018.

Moody’s said There will be near-term weakness. Yet, the change in corporate behaviour under the new bank leadership will be credit positive after the de-risking is complete.

In late January 2019, the bank appointed Ravneet Gill as its managing director and CEO, after the Reserve Bank of India restricted the bank's founder and long-time managing director and CEO, Rana Kapoor's term until January 2019. Ravneet Gill joined as MD & CEO on March 01, 2019.

In the next three years, the bank will slow loan growth to about 20-25 per cent a year, from an average of 34 per cent between fiscal 2014-19, it added.

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