Private sector lender Yes Bank reported a 3.8% fall in the net profit for the second quarter of the current financial year amidst a one-time impact of provisioning on corporate bonds and a rise in the gross non-performing asset ratio from the earlier projections.
The bank reported a net profit of ₹964.7 crore for the quarter ended September 30, 2018, lower than ₹1,002.7 crore in the corresponding quarter of the previous financial year.
The net profit included an impact of ₹252.2 crore due to one-time mark-to-market provisioning, predominantly on corporate bonds, the bank said in a statement.
While filling in for his embattled managing director and chief executive officer Rana Kapoor, the bank’s senior group president Rajat Monga told the media that the gross NPA ratio was pegged 1.60% for the quarter ended September 30, which was higher than the earlier projected 1.35% disclosed on October 1.
While the rise was primarily due to the classification of one account with an exposure of ₹631.2 crore as non-performing asset, the bank expects prepayments and consequent upgrade of this exposure in the third quarter of FY19.
Incidentally, the diversified corporate entity has already made a part payment and is expected to repay the balance as well post the sale of certain assets, clarified Mr. Monga.
Interest income rises
Net interest income grew 28.2% to ₹3,891 crore for the quarter ended September 30, 2018 while net interest margin was pegged at 3.3%, lower than the 3.7% registered in the corresponding quarter of the previous fiscal.
“Higher provisioning led to lower profitability,” said Saurabh Rathi, analyst, IIFL Securities.
“Going ahead, the bank is likely to focus on better rated corporates to improve asset quality. Risk weighted assets to total assets ratio has come down and we expect the bank will reduce it further. Investors may remain cautious till new management comes in,” he added.
IL&FS exposure
The bank’s gross outstanding exposure to the troubled IL&FS is ₹2,620.7 crore, which is entirely “standard” as per the Reserve Bank of India’s Income Recognition and Classification (IRAC) norms, said the bank in the statement while adding that the exposure is towards the asset rich subsidiaries and special purpose vehicles (SPVs) of the group where the enterprise value is commensurate with the debt level. On BSE, Yes Bank was among the top losers in the Sensex. Shares of the bank were down 2.77%, or ₹5.65, on Thursday to close at ₹198.35.