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YES Bank begins provisioning for exposure to ADAG, Essel group firms
Posted on 22nd May 2019
YES Bank, which has exposures to Anil Ambani's Reliance group and Essel group companies, has started making provisions for loans given to both entities. The provisioning began after rating agencies downgraded debt instruments of both groups.

YES Bank has an exposure of Rs 13,000 crore to Reliance group entities and another Rs 3,300 crore to Essel group companies, according to analysts. Though the bank has adequate collateral in terms of shares pledged by promoters of the two groups, YES Bank investors are concerned about the bank's exposure.

A source said several companies of the Anil Dhirubhai Ambani Group (ADAG) are doing well and the group is taking steps to repay banks. ADAG sold its electricity distribution business to Adani last year to lower its debt. It is also in the process of selling stakes in its mutual fund and general insurance arms. YES Bank's exposure to the Reliance group is almost 37 per cent of the bank's tier-1 capital.

YES Bank had asked Essel group promoters in January this year to increase its collateral so that the lender can ring-fence its exposure. The debt-laden group had asked for time till September to repay loans, after it sells a stake in flagship company Zee Entertainment.

The source said the bank is hopeful the sale will take place on time and its loans will be recovered in full.

Yes Bank's shares have tumbled by half since April 1. On Tuesday, the stock closed at Rs 141 a share, 1.8 per cent lower than its Monday closing. Early this month, the Reserve Bank of India (RBI) had appointed former deputy governor, R Gandhi, to the bank's board.

Soon after Ravneet Gill took charge as the new CEO on March 1, the bank announced a net loss of Rs 1,507 crore for the quarter ended March 2019 (Q4) due to a fall in its non-interest income and a sharp rise in the provisioning for bad loans.

Gross non-performing assets (NPAs), as a percentage of gross advances, soared to 3.22 per cent in Q4, compared to 1.28 per cent in the year ago period.

Bad loan provisions stood at Rs 3,662 crore in Q4 and at Rs 5,778 crore for the full financial year of 2018-19, including specific loan loss provisions of Rs 1,270 crore, and mark-to-market provisions of Rs 243 crore. This also included contingent provisions of Rs 2,100 crore against a stressed asset of Rs 10,000 crore. This provisioning has a major bearing on the bank's credit portfolio, which is predominantly in the below investment grade rating.

In its analyst call, YES Bank said the provisioning covers companies from real estate, media and entertainment and infrastructure, but did not provide any names.

Its provision coverage ratio -- at 33 per cent -- of total stressed assets is significantly lower than its loss, given the loan default experience of Indian banks. The coverage includes the provisioning for non-performing loans, standard assets and contingent provisions for stressed assets.

Related Companies: Yes Bank   

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