Yes Bank stock slips 5% as high provisions drag down its Q4 net profit

• Yes Bank’s net profit slipped 45% to ₹202 crore in March quarter of FY23.
• Provisions made against the bad loans rose more than doubled by 127.8% on year to ₹618 crore in the March quarter.
• The cash and cash equivalents of the bank at the financial year end of 2022-23 fell to ₹19,274 crore down from ₹46,639 crore in the previous fiscal year.

Shares of private sector lender Yes Bank slumped nearly 5% on Monday. The bank reported a huge 45% year-on-year dip in its net profit to ₹202 crore in March quarter of FY23. However, on a quarterly basis, its profit rose three times from ₹51 crore in the December quarter.

The bank’s net interest income rose 15.7% on year to ₹2,105 crore in Q4. Provisions made against the bad loans more than doubled by 127.8% on-year to ₹618 crore in March quarter.

Total provision costs for FY23 rose 50% from the previous financial year at ₹2,220 crore.

With this, the asset quality of the lender improved as the gross non performing assets (NPA) in the March quarter came down to 2.2% from 13.9% last year and 2.0% in last quarter.

Adding to its troubles, the cash and cash equivalents of the bank at the financial year end of 2022-23 fell to ₹19,274 crore from ₹46,639 crore in the previous fiscal year.

The company however claims that it’s on an expansion mode. “With continuous focus on retail, we have continued to expand our footprints with new branches, increased the employee headcount and stepped-up our investments in technology. Our retail franchise has now reached a critical scale and is poised for profitable growth,” said Prashant Kumar, MD & CEO at Yes Bank.

Yes Bank stock performs poorly in 2023 on fear of stake sale
Shares of the lender have lost a huge 27% in 2023 so far triggered by expectations of stake sale by investors; as the Reserve Bank of India (RBI) mandated three-year lock-in for investors ended on March 13.

This is for investors who had infused funds into the struggling private-sector lender in 2020 in exchange for an equity stake.

In March 2020, the RBI imposed a reconstruction scheme and superseded Yes Bank’s board due to a steady decline in the lender’s financial position, which struggled to raise adequate capital to make provisions for potential non-performing assets.

As a part of the reconstruction scheme, a consortium of 10 institutional investors led by State Bank of India (SBI) had infused ₹10,000 crore in Yes Bank to bail out the lender. Besides SBI, Axis Bank, IDFC First Bank and ICICI Bank are the other major banks that took part in the bailout.

The institutional investors were mandated to hold 75% of their shares bought as part of the rescue plan for three years until March 13, 2023. RBI had also asked SBI to hold at least a 26% stake in Yes Bank till March 2023.

Besides, FY23 is the second straight year of full year profitability for the bank. The lender’s financials have been improving since the crisis in 2020. The bank reported a net profit in FY22, its first full-year of profit since FY19.

“Over the last three years, the Bank has significantly progressed on several strategic objectives such as strengthening of governance and compliance standards, bolstering the balance sheet through granularity, addressing the asset quality concerns, building up a strong liability franchise and expanding the customer base,” said Kumar.

The bank reported a net profit of ₹717 crore in FY23 although it slipped 32% from the previous year with ₹1,066 crore profit in FY22, after a net loss of ₹3,462 crore in the year before.


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