While Yes Bank managed finally showed some profit in its financial audit book in June 2019 (Q1FY20) quarter, the major highlight was in regards to consistency in higher provisions for stressed assets. In the audit report, Yes Bank maintained confidence in respect to achieving credit cost target, but it did not shy away from highlighting sensitive sectors where the bank has stress exposure. Surprisingly, it would be iron & steel, telecom and gems & jewelry sector which have given sleepless nights to Yes Bank management. However, experts stated that even though it was a weak quarter, credit cost guidance was on expected lines.
Explaining its asset quality, Yes Bank stated that, credit cost stood at 32 basis points in June 2019 quarter. Surprisingly, gross non-performing assets (GNPA) overshot at huge 5.01% in Q1FY20, compared to just 1.31% in June 2018 quarter and 3.22% in March 2019 quarter respectively. Also, net NPA increased to 2.91% in Q1FY20, compared to Q1FY19 quarter where this indicator was not even near 1% with merely 0.59%. In Q4FY19, net NPA stood at 1.86%. So the problem in maintaining healthy earnings with Yes Bank is that of continuous uptick in stressed assets which is worrying many investors and experts.
Expert at Motilal Oswal in their note post Yes Bank’s Q1FY20 performance said, “Gross/NNPA increased 53% QoQ each though coverage ratio held stable. GNPL and NNPL ratios increased by 179bp and 105bp QoQ respectively to 5.01%/2.91% respectively. Gross Slippages stood at INR62.32b. Net Corporate Slippages were entirely from the accounts classified as BB & Below pool.”
At present, Yes Bank claims sensitive exposure in sectors like EPC, iron & steel, telecom and gems & jewelry. In fact, as on June 2019, exposure in percentage terms rose gradually to 10.1% in EPC sector in Q1 compared to 10% in Q4FY19.
While exposure in iron & steel grew to 3.2% in the latest quarter to 3% in Q4FY19. On the other hand, exposure in telecom sector remained unchanged at 2.5% versus preceding quarter. However, gems & jewelry saw 1 basis point rise in exposure to 1.3% in Q1FY20 versus 1.2% in Q4FY19.