On NPA ratio and earnings in Q4
We have made a recovery of Rs 5,000 crore and there has also been upgrade of almost Rs 777 crore. As a strategy, we have proactively made provisions on our existing books and our provision coverage on NPAs are 79% and the provision coverage on investment is 92%. So we are continuously strengthening the balance sheet and ensuring that the future earnings should not be impacted because of the credit cost of the previous year.Now the second wave of Covid has been far more severe and there is a lot of uncertainty. Do you think in light of this we could see higher provisions? Can you share some guidance as well on your credit costs?
As of now, it is too early to make any comment but up to 15th April there was absolutely no issue. Restrictions in movement would be different from the lockdown seen last year. Production is going on and the GST numbers are at a record high. So we are quite hopeful that this year the impact would not be that much. In our books, we have already acknowledged sectors that have been impacted by Covid as NPAs and made adequate provisions. Going forward, I do not think the kind of stress seen last year would be witnessed during the current year.
Your gross NPA ratio is still fairly high at about 15%. However, it is also due to the fact that your loan book has also shrunk. Is there an internal target that you have to bring down the gross NPA and further improve your provision cover ratio?
Our results should be seen in the backdrop that this is the first full year result after the bank was put under reconstruction. And after the reconstruction, there was a pandemic. In December, our GNPA was at 20% and has already come down to 15.4%. By the year end, our GNPA numbers would be less than 10%.
Similarly with the additional provisions, our net NPA numbers are below 6 and if you see the net book it has come down 20% as compared to December. We are targeting a minimum Rs 5,000 crore cash recovery to help us in bringing down both GNPA and net NPA numbers. Similarly on the retail and SME side, which is now 51% of our loan book, there the NPA percentage is one of the best in the industry. Our gross NPAs are less than 3% and net NPAs are less than 1%. And in terms of loan growth, on the retail side we have seen a 23% growth. So our overall loan book appears to be contracting because of additional provisions. But I think that process has now been completed and next year, we would be seeing a decent growth. Keeping in view the guidance on GDP growth, we are targeting a loan growth of overall 15%, where retail and SME would contribute around 20% and corporates would contribute around 10%.
If I am looking at Yes Bank from a two-year perspective, how is it that your loan book mix will actually look like between retail, SME and corporate book?
Our retail and SME book has already improved to 51% from 44% last year and our target is to reach around 60% in the next two years. And if we see in terms of the retail book, that alone has already reached to 30% from 24% and we would like to double the retail book over a period of three years. We are almost touching Rs 50,000 crore in retail. It is a very good book if you see in terms of GNPA number and net NPA number and similarly on the SME side. So we will take it to 60% and that would also help us in improving the credit quality of the whole loan book.
Your margins have been under pressure, largely on account of interest reversals. Can you give us an outlook as to where are your margins headed?
We already have a 2.8% margin for the full year and we would be moving towards 3%. So we are confident that next year our margins would be around 3%. We are continuously reducing our cost of deposit. So in the last one year, our cost of deposit has come down by 50 bps and with that the slippages are also under control.
What is your message to shareholders of the bank? Over the next two years, when can the profit and return ratios improve?
Last year, we gave a guidance of 1% ROA by FY23. We are absolutely on track of that. The milestone for the current financial year have been achieved, especially if you see on the deposit side. There has been a 55% growth in deposits. We are absolutely on track for our guidance of 1% ROA by the end of FY23. If we are able to achieve that then that should comfort investors.
Finally, is there any possibility of an M&A for Yes Bank? Will the bank be okay with being acquired completely or being merged perhaps with another bank?
No. We absolutely don’t think that. In the last one year, we have bounced back as a strong private sector bank. We would continue this journey but if there is any opportunity for us to acquire any other entity, we would definitely evaluate.
