Despite a dismal
first-quarter performance by Yes Bank, its CEO Ravneet Gill said the concerns about the private sector lender's asset quality have been over-done and that the lender plans to raise capital to refocus on growth.
Gill, in his interview to CNBC-TV18, said the capital raised would be "for growth purposes only, and not to heal the balance sheet" of Yes Bank.
Gill said the bank was looking to conclude the capital raising exercise in the second quarter of FY20. When asked if capital would be required for the bank's clean up exercise, he said the operating profit of the bank would suffice.
Gill did not specify the quantum of capital required for the mid-20s level of growth the bank is targeting at but said that $1 billion of capital would see the bank through the medium term.
Gill's comments come after
Yes Bank on Wednesday reported a near 91 percent plunge in year-on-year net profit on the back of a sharp surge in provisions and lower other income. Gross non-performing assets jumped by 53 percent in absolute terms sequentially, with the gross NPA ratio rising over 5 percent and loan growth moderating to 10 percent over the previous year.
Gill clarified that almost Rs 2,500 crore of the total slippages came from the 'watchlist', and the remaining from their BB & Below rated book. Yes Bank reported gross slippages of Rs 6,232 crore and net slippages of Rs 4,554 crore in the first quarter of FY20.
He clarified that the 'watchlist' was a subset of the BB & below-rated book, representing the pool where slippages could come from over the short term and was carved out to flag off the stress levels to investors before the bank raised capital.
While the watchlist stood at Rs 10,000 crore in Q1 of FY20, the BB & Below rated book expanded from Rs 23,000 crore in Q4 of FY19 to Rs 29,000 crore approximately in Q1 of FY20, he said. The addition to the low investment-grade book was on the back of credit rating downgrades of two financial services companies during the quarter, Gill clarified, without disclosing the names of the two companies.
When asked about the growth guidance for the bank, which has been under pressure following a shocking loss reported in the first quarter after Gill took over, he said, "Market opportunity has never been bigger or more compelling."
On the potential stress in the near term arising from the recognised pool of low investment-grade assets, Gill said, "We think BB & Below rated book has now peaked" and that there would be "no further expansion" of this book from the current levels. Two large resolutions are expected from the BB & Below rated book in the current quarter, which should significantly aide recoveries going ahead."
"Our real estate book stands at about Rs 24,000 crore and 25 percent of that is already captured in current NPAs and BB & below book," he said, adding that the remaining 75 percent exposure in real estate remains "top class", and would see minimal impairments.
Further, he said that the SMA -2 book (Special Mention Account-2), which has overdue of 60-90 days, stood at a little over Rs 400 crore, including Rs 250 crore from the bank's real estate exposure.
When probed about the level at which non-performing assets would stabilise, GIll did not spell out a number but said it would be "significantly lower" than the 5 percent Gross NPA at the moment.Yes Bank's provision coverage ratio remained at a little over 43 percent, below the level maintained by its peers. Gill admitted that it was not a satisfactory level but said it would gradually be taken up to over sixty percent as the recoveries increased.