Yes Bank plans bad bank, eyes Rs 15k cr capital raise

Mayur Shetty | TNN
Mumbai: Yes Bank plans to create a ‘bad bank’ out of its non-performing assets (NPAs) by hiving off its bad loans into a separate unit and offering the same to investors who specialise in stressed assets. The bank is also looking at raising Rs 15,000 crore through another round of equity issue.
The private bank’s share price closed nearly 7% higher at Rs 28 on Thursday after hitting the upper circuit intraday.The bank’s share price rose after it announced that its post-tax loss of Rs 3,668 crore turned into a profit of Rs 2,629 crore, adding a one-time gain from writing off its liabilities towards its additional tier-1 bonds.
Speaking to TOI, MD & CEO Prashant Kumar said that the bank has made provisioning of over 74% towards bad loans and stressed investments. Any provisions in future would be on account of Covid or economic slowdown.
“Now the stressed asset portfolio has a 74% provision coverage, there is no pressure. We can segregate it within the bank in a separate subsidiary, or if a bad bank is created, then the remaining bank looks very attractive with NPAs of less than 0.5%,” said Kumar. He added that there was huge interest from stressed asset funds who are interested in both — investments in the assets as well as capital of the company and taking over management.
Kumar said that the bank was currently compliant with the RBI’s norms on capital adequacy, with tier-1 capital of nearly 6.5%.
“We would like to have a buffer of 200 basis points (100bps = 1 percentage point) for future accounts. Also, we want to raise enough to meet our targeted growth of 10%. If we raise around Rs 15,000 crore, we would not need to come to the market for three years,” said Kumar.
He added that it was looking at raising equity from new investors including global funds. However, existing investors could pick up additional shares if they wished.
According to Acuite Ratings & Research chief analytical officer Suman Chowdhury, Yes Bank will need to raise additional capital in the order of Rs 5,000-10,000 crore in the near term to not only meet the regulatory requirements but also to absorb the incremental losses for the current year. “The ability to raise Capital 2.0 from existing or new investors within defined timelines and continued regulatory support for such equity mobilisation efforts will be the key to the sustainability of the bank. While the reported NPAs have declined in Q4 due to write-offs and the provisioning cover is healthy at 74%, there are significant risks of further slippages in the corporate portfolio post the end of the Covid moratorium,” said Chowdhury.
Carving out the NPAs would enable Yes Bank to position itself as a retail tech-savvy bank, said Kumar. He added that all the digital players, including PhonePe, who partnered other banks during the moratorium have returned to Yes Bank.Yes Bank does not have any plans to engage in a cost-cutting exercise on the HR front. “So today, I am not shedding my workforce, but it doesn’t mean that my workforce will continue to do what they were doing earlier,” said Kumar. He added that employees in the corporate office might be used for business division, analytics or customer calls.