Yes Bank: Going forward, YES Bank to deliver consistent business growth and profitability: Prashant Kumar


“I think what we are seeing in terms of recoveries every year we are able to recover or upgrade more than Rs 5000 crores and this year also we are on this track and so far we have been able to recover and upgrade almost Rs 4300 crores,” says Prashant Kumar, MD & CEO, Yes Bank.

Talk to us about the accounting of the ARC transactions, you have over provided by what I am looking at the figures 3000 crores what is your estimated recovery. How much of it has already been accounted for in the quarter that we are in right now?
On the ARC transaction if you see like almost Rs 43,000 crores of the gross assets have moved to ARC and the carrying value of those assets were somewhere in the range of Rs 5000 crores. But the valuation for those Rs 5000 is Rs 8000 crores of worth.

I think what we are seeing in terms of recoveries every year we are able to recover or upgrade more than Rs 5000 crores and this year also we are on this track and so far we have been able to recover and upgrade almost Rs 4300 crores.

So I think our guidance in terms of a recovery of more than Rs 5000 crores is that we would be definitely exceeding this.

But I think the whole portfolio recovery always takes some time because there are always legal issues and the decisions have to be taken by the appropriate judicial forums. So I think over a period of two, three years we would be able to recover fully.

Unlike other banks what we are continuing to see at Yes bank is provisioning going up, others are in the recovery phase, your provisioning is still going up and in fact there is again been a sharp uptick, what is causing this elevated provisioning and when will the cycle end?
Most of our provisions are coming from the ageing of our net carrying value of the assets which we are carrying in our balance sheet. Now if you see that currently our net NPA is 1% and the security receipts which we are carrying in our books they are to the extent of 2%.

So overall, the net NPAs and the security receipts are 3% and it has come down from 3.8% for the previous quarter.
So basically this is the amount which is Rs 5800 crores where the aging provisions come quarter after quarter. Sometimes there is a bunching of the provisions which happened in one quarter.

So I think this was one quarter where there was a spike because of the aging related provision and the provision going forward is a function of both in terms of aging. But also this is offset by the recoveries in this portfolio. Sometimes this is a timing mismatch otherwise over a period of time the recoveries would outpace the provisioning requirement of this group.

There is a new challenge for you, the Bombay High Court has disallowed the write down of that Rs 8400 crore piece of AT1 bonds. So in your view what is the worst impact of this Bombay High Court ruling on Yes Bank because I guess that is why you are seeing that big disappointment that hit on the stock price as well this morning?
First thing I think we have the legal opinions which gives us very-very strong grounds to challenge this decision before the honourable Supreme Court and that we are going to do. We are having six weeks to make an appeal in the Supreme Court that is one part.

The second thing in your question in terms of what could be the worst case scenario, first I would like to explain the terms and condition of these instruments which are the AT1 bonds. First these are the perpetual bonds and this is the discretion of the bank whether to exercise the call option or not. So it means they can continue in our books forever.
Second again as per the terms and condition of these instruments this is at the discretion of the bank to pay the interest or not except in those situation where the bank is paying dividend to the equity holders. In those cases definitely the bank has to pay the interest.

Third thing in these instruments there is no cumulative interest payment obligation. It means in one year if a decision is taken not to pay then it does not accumulate in the going forward years.

So I think this is what we need to appreciate that these are the terms and condition of these instruments but in the worst case scenario the only impact would be that our core equity would come down to the extent of 3% and the AT1 would go up by 3%. So our overall tier one capital and our overall capital would remain the same.

We are not seeing such kind of impacts and we have recently raised capital and there is some amount of capital which is yet to come which would be out of the conversion of the warrants. So we do not see any challenges.

And another part which I would also like to share here I think our bank have faced multiple challenges in the past but I think the resilience of the bank in terms of meeting those challenges and coming out stronger has been proved multiple times.

So Advent and Carlyle are the PE Funds. They will eventually exit in the next three to five years. So what is then the next three to five year plan that you have in mind?
No, I think these private equity players do not come for such a short period. Their time horizon especially in investing in our bank is long term. So they are not like three years of five years.

So then what about the as the lock and expires in March 2023, is there a concern for you?
I cannot speak on behalf of any bank. They are the listed entities but during our conversation with the various investor banks I think we have been getting the confidence that there is no need to worry in terms of when the lock in of the shares would be not there in March. So I think we are getting that kind of confidence.

With these investors on the board now so what are the changes going forward? Also a large portion of investors have locked in which expires in March 2023 is that a concern for you?
I think we need to see in terms of the infusion of the capital and the induction of the two nominee directors both from Advent and Carlyle.

Our board is a very strong board in terms of board members having very wide experience across the financial system and going forward what you can expect from us would be a very-very consistent delivery both in terms of business growth as well as in terms of profitability.

Bombay High Court relief to YES Bank AT1 bond holders on petition against Rs 8,415 cr write-off

Yes Bank: Going forward, YES Bank to deliver consistent business growth and profitability: Prashant Kumar

Bombay High Court, in an oral pronouncement on Friday, quashed the write-off of additional Tier-1 (AT1) bonds issued by Yes Bank Ltd, said legal sources with direct knowledge of the matter.

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