Even as YES Bank eyes continued loan growth, the net interest margin (NIM) will likely be under pressure for the next two quarters, Prashant Kumar, Managing Director and Chief Executive Officer, said on Monday.
In the April to June quarter, the bank recorded loan growth of around 14 percent, and according to Kumar, a similar trend is expected to continue. "We need to see how the liquidity would function in the third and fourth quarter. And in this Reserve Bank of India policy, everybody would be looking at what the apex court does for liquidity. If liquidity tightening continues, going forward there will be some pressure on the markets, especially in Q3 and Q4," he told CNBC-TV18.
Meanwhile, YES Bank will sell its bad loans valued at Rs 48,000 crore to JC Flowers for Rs 11,183 crore. Following the sale, Yes Bank's non-performing assets (NPA) would fall to two percent from 13.45 percent.
Kumar said the financial results of the October to December quarter would reflect the selling of the NPAs. "The whole transaction, and assignment of the loans would happen within 60 days - so by November end. The December quarter numbers should reflect this part," Kumar said.
Meanwhile, the bank's board has approved the acquisition of up to 19.99 percent equity stake in JC Flowers, which will be done in single or multiple tranches for Rs 350 crore. Kumar said that the acquisition is subject to required regulatory approvals. The lender would be immediately investing 9.99 percent and would then seek regulatory approval for the remaining.
The amount YES Bank will receive from JC Flowers following the NPA sale would reduce the bank's security receipt. "When we will be holding the security receipt to the extent of cash, we would reduce our holding of the SR. So, the issue is more in terms of how we would be bringing down the SRs in our book. So, ultimately the NPAs will be converted into the SRs which comes from the investment side.”
YES Bank CEO also said that in the last two years, the lender has successfully recovered and resolved almost Rs 13,000 crore and is seeing a similar kind of resolution in the current year. "We believe that we can play an important part in the entire landscape," he said.
From an industry standpoint, Kumar said that liquidity mobilisation is the issue that all banks face in the current quarter because liquidity deficits are very tight. "Everybody is trying to get more and more deposits and at the same time continue to have control on the cost of deposits."