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YES Bank cuts NPAs unearthed by RBI to a fifth

Reports 25.1% rise in net profit in second quarter as gross NPAs doubled to Rs 2,720.34 crore

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YES Bank on Thursday said it has addressed the issue of non-performing assets (NPAs) raised by a Reserve Bank of India (RBI) audit, which showed the bank had under-reported its non-performing assets (NPAs) by Rs 6,355 crore for 2016-17.

The bank said it has undertaken upgrades, sale to asset reconstruction companies (ARCs) and downgraded the accounts by setting aside adequate provisions to buffer the loans it was confident of recovering.

On Thursday, YES Bank share rose 1.24% to close at Rs 331.70 on the BSE.

The management in an analyst call said about Rs 2,986 crore of the Rs 6,355 crore is upgraded from March to date with an approval of the Board and statutory auditors, while another Rs 1,715.85 crore has been repaid. About Rs 440 crore of loans in this pool have been sold to ARCs.

After the upgrades and selling off loans, the divergence has now come down to Rs 1,200 crore, according to the management. Higher under-reporting also forced the bank to hike its provisions to Rs 443 crore during the quarter, much higher than the Rs 250 crore of provisioning it normally does during a quarter.

The divergence reported in 2016-17 is also higher than the divergence reported in 2015-16 when RBI had red-flagged Rs 4,925.6 crore of loans as NPAs when the bank had reported a gross NPA of Rs 748.9 crore.

Rana Kapoor, managing director and chief executive officer, YES Bank, told analysts in the concall, "Over the past two quarters, the amount of loans picked by the regulator have either been repaid and recognised by the bank. The entire impact of the divergence is absorbed in the second quarter despite the RBI giving us the audit report just a few days back. That is 81% of the exposure is either repaid, resolved or sold."

Gross NPAs doubled to Rs 2,720.34 crore, which is 1.82% of the gross advances of the bank. This compares to 0.92% as of the end of June quarter and 0.39% in the year-ago quarter.

Despite the substantial divergence and rise in NPAs, YES Bank reported a 25.1% rise in net profit to Rs 1,003 crore on the back of robust growth in advances and also its other income and net interest income. This is the first time that the bank is reporting a four-digit net profit in its 12 years of existence.

However, the asset quality continues to haunt the bank.

The high growth in profit helped the bank raise provisions for the NPAs. The gross advances of the bank grew 34.9% to Rs 1,48,675.3 crore, led by a robust growth in retail and corporate advances.

Net interest income (NII) for the quarter rose 33.5% to Rs 18,885 crore. The fees and commissions which is the other income rose 35.4% to Rs 1,248 crore.

Total deposits for the quarter rose 23.4 %to Rs 1,57,989 crore with current and savings accounts growing by 6.9% over the previous year. Total advances grew 34.9% to Rs 1,48,675 crore as on September 30, 2017.

Earlier this week, RBI imposed a penalty of Rs six crore on account of asset classification issues and a delay in reporting a security incident across its ATM network last year.

ON GROWTH TRACK

  • The gross advances of the bank grew 34.9% to Rs 1,48,675.3 crore, led by a robust growth in retail and corporate advances
     
  • Net interest income (NII) for the quarter rose 33.5% to Rs 18,885 crore. The fees and commissions which is the other income rose 35.4% to Rs 1,248 crore
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