Covid-19 provisions may consume maximum 1% capital, says YES Bank CEO

The private lender is in the capital market to raise equity worth Rs 15,000 cr via an FPO in the Rs 12-13 price band

YES Bank on Monday said the provisioning undertaken due to the pandemic may consume at most 1 per cent of its capital. The lender will tap the capital markets to raise Rs 15,000 crore through a follow-on public offer (FPO).  

Prashant Kumar, MD and CEO, said proceeds from the FPO will improve its common equity tier-I (CET-1) ration by 5 per cent. This will provide a buffer (to absorb shocks) and capital for supporting growth over the next two years, Kumar told the media. Shares closed 13.3 per cent down at Rs 22.1 apiece, on the BSE. 

According to the draft prospectus, YES Bank had failed to comply with the minimum CET-1 and tier-I capital requirements as of March 31. The CET-I ratio stood at 6.3 per cent and tier-I ratio at 6.5 per cent, compared to the minimum requirements of 7.375 per cent and 8.875 per cent, respectively.

Further, its capital adequacy — under the RBI’s Basel-III Capital Regulations —was 8.5 per cent (standalone). 

The lender hiked its provision coverage ratio from 43 per cent to 73 per cent in FY20, following an asset quality review. Future earnings will not be impacted by the existing loan book and investments. It intends to hive off its bad loan portfolio to a subsidiary, subject to regulatory approval, he added.

He added that the bank was in the midst of implementing a cost optimisation plan, as part of which it may rationalise 35-40 branches. 

On March 13, the government had approved a rescue plan for YES Bank, under which it received Rs 10,000 crore from eight financial institutions, including Rs 6,050 crore from SBI. The bank also wrote down additional tier-I bonds amounting to Rs 8,415 crore.