Yes Bank Q4 FY2019 Results Update (26th April, 2019)

Introduction

Yes Bank shares fell around 30% on April 30,2019 after the company reported weak key financial parameters for the quarter ended March 2019 ie. Q4 FY2019. According to the Q4 results, the bank has reported a net loss of Rs.1,507 Crore on the back of spike in bad loans (mainly IL&FS Group and Jet Airways). Lets analyse the Q4 FY2019 results of Yes bank in detail in this article.

Company Profile

  • Yes Bank Limited is India’s fourth largest private sector bank, incorporated in 2004 by Rana Kapoor and Ashok Kapur. It primarily operates as a corporate bank, with retail banking and asset management as subsidiary functions.
  • The bank offers a full-range of client-focused corporate banking services, including working capital finance, specialized corporate finance, trade and transactional services, treasury risk management services, investment banking solutions and liquidity management solutions among others to a highly focused client base.
Business Areas
  1. Corporate and Institutional Banking- The bank offers a broad range of financial and risk management solutions to clients such as large Indian corporates and groups, multinational companies, central and state governments, government bodies and public sector enterprises.
  2. Business Banking- Yes Bank offers a range of products, services and resources to small and medium businesses.
  3. Corporate Finance- It offers corporate finance solutions to various clients such as local corporates, multinational companies, financial institutions and public sector undertakings.
  4. Retail Banking- Under this, the  bank offers wide range of products and services such as saving account, current account, fixed deposit, retail loan, depository services and many more.
  5. Investment Banking- Yes Bank offers investment banking services in area of mergers and acquisitions, divestitures, private equity syndication and IPO advisory.

Current statistics of Yes Bank

Current Statistics of Yes Bank

Q4 FY2019 Results

Yes Bank Q4 FY2019 Results
  • On April 26, 2019 Yes Bank reported its biggest quarterly loss in 14 years at Rs.15,066 Million for the Q4 FY2019 owing to spike in bad loans (mainly IL&FS Group and Jet Airways). Net loss incurred because of the decline in the other income & increased proactive Contingent provision for the bad loans. Net Profit in Q4 FY2018 was Rs 11,794 Million.
  • NII (Net interest income), the difference between interest earned and interest expended, grew by 16.3% year-on-year in Q4FY19 to Rs 25,059 Million with credit growth at 18.7% , but net interest margin contracted by 30 bps. NIMs for Q4FY19 is at 3.1% on account of higher slippages during the quarter. FY19 NIMs at 3.2%.  Lower NII/NIMs are seen on account of higher NPA recognition in Q4.
  • Non-Interest income at  Rs.5,317 Mn for Q4FY19 as Retail Banking Fees witnessed high sequential growth of 18%
  • Taking the entire year into consideration, Net Profit of FY2019 is at Rs.17,203 Million, plunged 59% and net interest income grew by 26.8% to Rs.98,090 Million compared to previous year.
Comparing Yes Bank’s Q-o-Q Operating & Net Profit

Balance sheet Clean-up by Provisions & Contingencies to Strain Profitability

  • The balance sheet clean-up by Yes Bank will strain its profitability in the next 12-18 months as it makes provisions for stressed assets. The bank is profitable on a full-year basis, with a return on assets of 0.5% as of March 31, 2019, as against 1.4% a year ago.
  • It’s overall stressed assets are about 8%of its gross loans. Thus, the balance sheet clean-up will strain the bank’s profitability in next 1 year since it provides for the stressed assets.
  • The March quarter loss (Q4 FY2019) of Yes Bank was driven by higher credit costs for non-performing loans (NPLs) and the creation of a contingent provision against a pool of identified stressed assets. The bank has created contingency provision of around Rs 21,000 Million pursuant to a review of the credit portfolio.
  • As a result, Provisions and contingencies shot up significantly to Rs 36,617 Million in Q4 FY2019 with a massive increase of 9 times over corresponding period last year and 6.6 times compared to previous quarter.
  • Total provisions for the quarter Q4 FY2019 also included provisions related specific loan loss Rs 1,270 crore, investment Mark to market (MTM) Rs 243 crore and other Rs 48 crore.

Yes Bank Share Price Movement Post Q4 Results

Yes Bank’s Share Price Fall Post Q4 FY2019 Results
Source : www.marketsmojo.com
  • The share of Yes Bank was closed at Rs. 237 on Friday April 26, 2019.
  • Reacting to the result, the bank’s shares on April 30, 2019 (Tuesday) slumped over 30% to Rs.165.30 apiece on the BSE in the early trade. The scrip ended the day at Rs 168, down 29.23% on the BSE.

Future Outlook

  1. In January 2019, Yes bank appointed Ravneet Gill as its managing director and chief executive officer (CEO) after Rana Kapoor stepped down. Under the new leadership of Mr. Gill, the change in corporate behaviour is expected to be credit-positive after the de-risking is completed.
  2. In the next three financial years, the bank may slow loan growth to about 20%-25% annually, compared with an average loan growth of 34% a year between 2013-14 and 2018-19.
  3. The bank has planned to increase its focus on the retail segment and small- and medium-sized enterprises, reducing the dependence on corporate lending gradually. Thus, a reduction in loan concentration to large corporate groups will be credit-positive. Since these types of loans have lent volatility to the bank’s asset performance in the recent years. Thus, the robust transaction banking, retail and digital platforms will allow the bank to accelerate granularity in our businesses
  4. The bank’s board has approved an equity capital raising plan of up to $1 billion, which, once complete, will help improve loss-absorbing buffers while supporting asset growth. The board has also approved raising fund up to Rs.20,000 crore by issue of debt securities.