Yes Bank’s crucial step of transferring its entire bad loan book of about Rs 50,000 crore to an asset reconstruction company (ARC) has got delayed due to the spread of the third wave of the coronavirus pandemic. 

The ARC, with Yes Bank an equity partner, is most likely to get formed in the first quarter of the next financial year. The private lender will start on a fresh note with no non-performing assets (NPAs) after the transfer process is completed. 

“Due to Covid-19 and regulatory approvals, the work of setting up an ARC may get pushed to the first quarter of FY23. The transfer would also include the written-off loans and we will be left only with our good loan book,” said Yes Bank managing director and CEO Prashant Kumar.

Yes Bank has shortlisted four prospective investors for the ARC and expects the Reserve Bank of India (RBI) to give the licence by June, Kumar added.

The bank has its gross NPA at 14.65% as on December 31, 2021, compared with 15.36% a year ago and 15% sequentially. Fresh slippage in the December quarter was lower at Rs 978 crore as against Rs 1,783 crore a quarter ago.

Net NPAs declined marginally to 5.3% compared to 5.5% in the previous quarter. In the year-ago period, net NPA was at 4% of total advances. 

Kumar said the bank may not fundraise during the current fiscal but may consider tapping into the market for capital in FY23. 

Yes Bank has a capital adequacy ratio of 17.7% as on December 31, 2021, with common equity tier I of 11.6%. 

The bank’s total assets crossed Rs 3 lakh crore for the first time since September 2019. The balance sheet grew 6% sequentially and the retail: corporate mix improved by 300 bps sequentially to 57:43.

The CASA (current account savings account) ratio came in at 30.4%, up 100 bps sequentially and from 26% a year ago. The target of having CASA ratio at over 30% was thus achieved in FY22. Importantly, the bank for the first time opened over Rs 1 lakh CASA accounts in the December quarter.

Yes Bank reported a 77% year-on-year growth in net profit to Rs 266 crore for the fiscal third quarter ended December, its highest since December 2018. This was helped by higher loan recoveries and an 82% drop in provisioning at Rs 375 crore versus Rs 2,089 crore a year ago. 

NPA provision coverage ratio (PCR) stood at 79.3% as on December 31, 2021, versus 81.5% a year ago and 78.9% a quarter ago.

The bank had recoveries of Rs 610 crore and upgrades of Rs 573 crore in the December quarter. 

Net interest income (NII) was down 31% year-on-year to Rs 1,764 crore and other income declined 32% to Rs 734 crore. Net interest margin (NIM) for the quarter was at 2.4% versus 2.2% in the September quarter and 3.4% in the year-ago period. 

Total net income fell 31.5% to Rs 2,498 crore in the December quarter as against Rs 3,648 crore reported a year ago.

Non-interest income dropped 32.5% to Rs 734 crore compared to Rs 1,087 crore a year ago.

The bank’s gross advances grew 3.8% to Rs 1.76 lakh crore while deposits rose 26% to Rs 1.84 lakh crore.

The bank lowered the guidance for credit growth in FY22 to 10% from an earlier estimate of 15%.

Kumar explained that the bank had to bring down its targets as the companies were repaying their loans. "There has been de-bulking and deleveraging by large corporates. This has led to scaling down of target. The credit growth in the nine-month period ended December 2021 was 6% and the balance 4% would happen by March," Kumar said.

Retail disbursements for the quarter stood at 9,313 crore, SME at Rs 4,940 crore and wholesale at Rs 4,760 crore.

Yes Bank opened 22 new branches and increased headcount by 1,065 since March 31, 2021.