November 3, 2019 / 11:00 PM / 10 days ago

RPT-UPDATE 1-India's Yes Bank posts quarterly loss as asset quality worsens

(Repeats for wider distribution)

By Nupur Anand and Chris Thomas

MUMBAI/BENGALURU, Nov 1 (Reuters) - Indian private-sector lender Yes Bank Ltd reported a bigger-than-expected loss for the second quarter on Friday, as asset quality worsened and provisions swelled.

The results mark Mumbai-based Yes Bank’s fifth straight quarter of weak earnings as it struggles to recover from an ongoing credit squeeze in India’s economy as well as a pile of bad loans.

Net loss for the three months to Sept. 30 came in at 6 billion rupees ($84.7 million), compared with a profit of 9.65 billion rupees a year earlier. Analysts had expected a loss of 3.10 billion rupees, according to Refinitiv data.

The results were also hurt by a one-time deferred tax asset adjustment of 7.09 billion rupees related to the bank's shift to India's new corporate tax structure, Yes Bank said here

Chief Executive Officer Ravneet Gill, who took charge in March, last month warned the credit squeeze in the economy had hurt the bank’s asset quality, which has already been hammered by exposure to troubled infrastructure, aviation and housing finance companies.

Gross bad loans as a percentage of total loans rose to 7.39% as of September-end from 5.01% in the previous quarter. It was 1.60% a year ago. Provisions for the quarter jumped 42.2% to 13.36 billion rupees.

Pressed for capital, the bank has been in talks with investors. It said on Thursday it had received a binding offer of $1.2 billion from a global investor, without giving further details.

Yes Bank had “eight very strong bids” from global private equity firms and some domestic investors, Gill told investors on a conference call on Friday, according to an analyst who did not want to be named.

Yes Bank executives said a part of its loan book worth some 310 billion rupees that was below a “BB” credit rating could slip into the bad loan category, the analyst said, adding the bank raised its annual credit cost forecast to 225-250 basis points (bps) from 125-150 bps.

“Overall it’s a challenging time, still, for the bank...the only solution will be to raise capital at the earliest,” said Siddharth Purohit, research analyst at SMC Institutional Equities in Mumbai.

Quarterly net interest income fell 9.6% to 21.86 billion rupees, while net interest margin, a key indicator of a bank’s profitability, declined to 2.7% from 3.3%.

Shares of the bank ended 5.4% lower before the results and have fallen 63% this year.

$1 = 70.8160 Indian rupees Reporting by Chris Thomas in Bengaluru; Editing by Subhranshu Sahu and Arun Koyyur

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