Yes Bank update

Last updated: 11 Sep, 2020 | 09:55 am

Yes Bank update

Yes Bank has fully repaid the Rs 50,000 crore provided by Reserve Bank of India as a special liquidity facility amid the crisis faced by the lender earlier this year.

Yes Bank’s position in March

  • At the end of FY20, Yes Bank’s GNPA rose more than 4 times to 16.80%, while the Capital Adequacy Ratio had dwindled to 8.50%
  • The bank had heavy exposure to a lot of stressed borrowers including DHFL and IL&FS.  In April 2019, the bank had classified about Rs 10,000 crore of its exposures, representing 4.1 per cent of its total loans under watch list, as potential non-performing loans over the next 12 months.
  • All this led to a severe drop in profitability for the bank, as it recorded a record loss of ₹16,418 crore for the year FY20
  • On March 5, 2020, the Reserve Bank of India (RBI) imposed a 30-day moratorium on YES Bank’s deposits and superseded the private-sector lender’s board after the bank’s asset quality and liquidity position worsened, and depositors scrambled to pull out their money
  • A Rs 60,000 crore special liquidity window was first offered to Yes Bank in March as part of the RBI’s rescue effort. A second such liquidity window worth Rs 50,000 crore was offered to Yes Bank in June-2020. The windows were offered to the bank to repay depositors who were withdrawing funds from their accounts
  • A group of banks, led by SBI invested Rs 10,000 crore in Yes Bank to save it from collapsing

Business showing improvement

  • “Yes Bank’s business has shown some improvement since the central bank RBI stepped in to rescue the lender in March-2020. Yes Bank has repaid the entire sun of ₹50,000 crore to the RBI drawn for interim support, ahead of the deadline” {{tweet}}
  • In July, Yes Bank also raised ₹15,000 crore through follow-on-public offer in order to improve its capital adequacy ratio which had fallen below the regulatory requirements. 

The Bank’s Tier 1 capital stood at 6.5% (much less than RBI’s minimum requirement of 8.875%)

  • After the fundraise, the bank’s Tier 1 capital has increased to 13.5%. Its total capital adequacy ratio stands at 20%. 
  • “On Aug 3, Moody’s raised Yes Bank’s rating, noting that the successful equity raising indicates Yes Bank’s regained access to external market funds, which is a result of its improving financial strength and will support depositor confidence,” {{tweet2}}
  • The lender’s deposit base rose 11.4% quarter-on-quarter to Rs 1.17 lakh crore in the quarter ended Jun.

INDmoney Analysis

  • The fundraising from various banks and the FPO have provided a fresh lease of life to Yes Bank. The bank has said that it is also getting strong “customer liquidity inflows,” and that deposits were accruing on a monthly basis now. 
  • The deposits have now grown to Rs 1,17,360 crores up 11.4 per cent QoQ aided by 26.4 per cent QoQ growth in current account deposits and 12.6% QoQ growth in term deposits. With this, the CASA ratio stands at 25.8% in Q1FY21.
  • However, asst quality remains a major concern. The Gross NPAs have now worsened to 17.30% as on June 30, 2020. Further, the bank has not made any disclosure with respect to the share of loan book under moratorium. With the moratorium getting further extended by two months, this could lead to a fresh bout of NPAs in the upcoming quarters. 
  • Once the loan moratorium gets lifted, all banks and NBFC’s will witness a sharp rise in their NPA’s. Determining true asset quality is extremely difficult currently due to the government-imposed moratorium. 
  • A small positive is that the stock has already priced in a lot of the concerns. 

Consensus Recommendation: Sell (based on views of 14 analysts from external research institutions)

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