We will not see repeat of elevated slippages: YES Bank's Ravneet Singh Gill

I think we were in consolidation mode for two quarters; it is important now to get on foot, says Ravneet Singh Gill

YES Bank has reported its second quarter (Q2) results, showing asset quality continues to deteriorate. Ravneet Singh Gill, managing director and chief executive officer, tells Abhijit Lele & Nidhi Rai that things will now look up and why. Edited excerpts:

You have reported losses due to DTA (deferred tax adjustment) and also a sharp drop in asset quality. What hit the bank?

We had the net profit adjusted for DTA of Rs 702 crore. So, we thought our profitability to be better than what the Street expected. The key thing for us is to quickly raise capital and get on with it. I think we were in consolidation mode for two quarters; it is important now to get on foot.

The amount of slippages in Q2 has taken people by surprise. They were going by the guidance (forecast) you had given by the fourth quarter of FY19.

We had a Rs 2,100 crore contingency provision for precisely this purpose, to work as a buffer if you need to provide for it. We did revise the credit cost guidance upwards, for three reasons. First, the macro environment continued to remain challenging. Second, we were anticipating certain (debt) resolutions, including a housing finance company account, which were there in the public domain.  The resolution was expected to be done in the last quarter but that didn’t happen. And, finally, if you look at certain events which happened in corporate India, they were so disappointing. Like in a south-based group — you cannot budget for that. Or the fraud that happened in a power unit. I think these things are very difficult to anticipate. It is not that credit was bad but it got mismanaged.

Can you confidently say that you will not get such surprises, going forward? What is the confidence that people should believe you?

All the borrowers we have lent to have also borrowed from other lenders. I think the only issue with us is that our capital buffers are not as thick as other banks. So, once we raise capital, I think the concern around it will also mitigate.  It is why the market (currently) says that our ability to absorb a setback is less compared to others.

What timeframe are you looking at for the capital to come in?

We announced the bids because our lawyers told us the deal is price-sensitive information and you should immediately share this with the exchanges. Also, we have eight other investors which are foreign private equity funds and domestic mutual funds, where we have total bids of $1.5 billion. Also,  two very well respected financial investors and two family offices are speaking to us. Between them, it is another $350 million on offer. So, in such a challenging market we have bids of over $3 billion.

There is certain clarity as to what the books of the bank look like and they feel that the revenue generating capability of the bank remains intact so once we have recapitalised it could start really performing very strongly as far as revenues are concerned. So when we raised the QIP in august we were very clear that the next capital raising will be from private equity. We wanted to do private equity was that we wanted to do external validation.

So capital reach should happen by the end of the financial year?

No. we want it happen to before calendar year 2019- end.

There was a buzz in the market that a Singapore sovereign fund-backed bank was interested. Is it true?

I also saw that message, that a so-called investor is talking to the government for a merger. Merging one bank with another bank is not so simple a process. By now, we have been merged with every bank (via rumours) in the country.

What is the current status of your provisioning and stress book?

At the end of the fourth quarter (of 2018-19), we had Rs 29,000 crore of (credit rating) BB and below in the loan book and of this, we had the Rs 10,000 crore watch list. It was part of the book, not separate. The purpose of the watch list was to show that there could be short-term slippages because at that time we were looking to raise capital. The book has grown to Rs 31,000 crore on addition to the stressed loan pool in the second quarter.