Banking

Second covid wave leads to retail stress buildup at Yes Bank

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Mumbai: Like its peers, private sector lender Yes Bank also witnessed a deterioration in asset quality of its retail loans in the June quarter, a trend that mirrors the impact of the second covid-19 wave on income streams of small borrowers.

As compared to the previous quarter (January-March), gross non-performing assets (NPA) ratio rose 40 basis points (bps) to 3.3% of retail assets. That apart, retail loans that were overdue between 61-90 days rose to 790 crore in the June quarter, from 234 crore in the March quarter and 513 crore in the June quarter of the previous year. Loans turn non-performing if repayments are not made within 90 days of the scheduled date.

The bank added 760 crore of bad loans in the retail segment, recovered and upgraded 224 crore, and wrote off 344 crore of individual loans in Q1 FY22.

“This is quite understandable because of the kind of impact the pandemic had on the entire nation during April and May when the foremost thing was how to save lives. This and the lockdowns have definitely impacted the earning capacity,” said Prashant Kumar, chief executive of Yes Bank.

However, Kumar said that the improvement in the economic environment has led to an improvement in the lender’s collection efficiency.

“We are expecting that these accounts would not turn into NPAs as collection efficiencies are improving. This is a one-off thing,” said Kumar.

The bank, he said, is on track to achieve its FY22 objectives.

“The months of June and July has seen an uptick in the high frequency indicators and business momentum is picking up. Businesses are adjusting to the new normal with reduced economic impact,” said Kumar.

A recent directive by the Reserve Bank of India (RBI) prohibiting global card network Mastercard from issuing fresh cards will also have an impact on Yes Bank, whose entire credit card scheme was on that network. The bank has already entered into an agreement Visa and will do a similar tie up with domestic network Rupay. The lender’s total credit card base stood at 987,000 as on 30 June.

“We would be able to start issuing our credit cards within 90 days. For the next three months, we would miss out on issuing around 75,000-100,000 credit cards and this should not have any impact on the profitability of the bank, but acquisition momentum will be lost in the next 90 days. We would make up that momentum in the current financial year,” said Kumar.

Last week, RBI had restricted Mastercard from onboarding new customers from 22 July for failing to comply with its data localization norms. In April, it has placed similar restrictions on American Express Banking Corp. and Diners Club International Ltd.

The bank Yes Bank Ltd on Friday reported a more than quadrupling of its net profit at 207 crore for the quarter ended 30 June, from 45 crore in the same quarter last year on account of lower provisions and robust other income. While its provisions fell 41% on a y-o-y basis to 644 crore, its other income rose 70% to 1,056 crore.

Its net interest income (NII) – difference between interest earned and expended – stood at 1,402 crore, down 26.5%. The bank’s (NIM), an important metric of profitability, stood at 2.1% and was 50 bps higher sequentially, but 90 bps down on a y-o-y basis.

Yes Bank shares on BSE stood at 13.07 on Friday, up 0.38% from its previous close.

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