Tag - recoveries

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09 Sep

COVID-19 has led to a delay in recovery – Yes Bank

On Tuesday, Nifty ended 0.3%, lower than the previous close at 11,317. The top gainers for Nifty 50 were BPCL (+2.8%), HCL Tech (+2.0%), and Infy (+1.4%) while the losing stocks were Infratel (-8.1%), ZEEL (-4.7%), and Tata Motors (-4.5%). The only sector in green was IT (+1.2%). The top losing sectors for the day were Media (-3.0%), Realty (-1.7%), Pharma (-1.6%) & PSU Bank (-1.6%).

Edited excerpts of an interview with Mr Prashant Kumar, MD & CEO, Yes Bank Ltd; dated 07th September 2020 from CNBC TV 18:

The recovery target would be for the entire stressed book; it is an issue about the timing. Due to COVID, the targets which the bank was expecting during FY21E have slowed down a bit. But he thinks that the bank is absolutely on track and during the current year and going forward he is confident that they will be able to recover.
Yes bank has seen a 22% cost reduction in 1QFY21. Yes Bank is targeting cost reduction of at least 10% year-on-year (YoY), but because of COVID, everything is not working in the way it used to work in the past. So, he thinks that is helping them to reduce costs further. They are working on the current situation. The Bank has launched a programme which allows a sizeable portion of the workforce to work from home which will be convenient for the younger generation & women associated with the bank.
Yes Bank already has provision coverage of almost 76% on their loan book. This loan book with 76% coverage where the estimates of loss given default (LGD) is something around 60-65%. So, that kind of loan assets can very easily move to SPV.
Talking about Dish TV stake of 24% with Yes Bank, Mr Kumar said that every case has its own merits and reasons for taking a specific course of action. In the case of Dish TV, they are evaluating the different options. He further added that there are a number of suitors for Dish TV and that they are looking for the best deal.
Deposits have seen 11% QoQ growth in 1QFY21. Going forward, he sees good progress on deposit front. There is deposit accretion seen. As of March 2020, the corporate & retail contribute is 50:50. The bank is also able to protect their margins accordingly.
Loan Book recoveries rate elongated due to COVID situation.
Yes bank looking for three partners on life as well as non- life.

Consensus Estimate: (Source: market screener website & investing.com)
The closing price of Yes Bank Ltd was ₹ 14/- as of 08-September-2020. It traded at 0.8x/0.5x/1.0x the consensus book value estimates of ₹ 17.0/29.0/13.5 for FY21E/FY22E/23E respectively.
The consensus target price of ₹ 28/- implies a PE multiple of 2.1x on FY23E EPS of ₹ 13.5/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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03 Jan

2020 will be the best year in terms of recoveries – Rajnish Kumar, SBI

Excerpts from an interview of Mr Rajnish Kumar, Chairman, State Bank of India with live mint dated- 02-01-2019:

Update on the Indian Equity Market:

On Thursday, NIFTY closed +0.8% higher. Among sectoral indices NIFTY Metal (2.7%), NIFTY PSU Bank (+2.0%), NIFTY PVT Bank (+1.2%) closed higher. NIFTY IT closed on marginally negative. The biggest gainers were Tata Motors (+5.1%), Tata Steel (+4.3%) and UltraTech Cement (+4.2%) whereas Eicher Motors (-2.3%), BPCL (-1.0%), and Bajaj Auto (-0.9%) ended with losses.

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  • Mr Kumar says, there is an issue around credit growth particularly in the corporate sector. This year, estimated growth is around 7-8%.
  • Non-performing assets (NPAs) are alright, atheist the recoveries are happening.
  • Term loans are growing. The year-on-year growth is ₹1.7 trillion. Last year, the bank had seen good disbursements and that helped to achieve high credit growth of 13%.
  • He says the pickup in capacity utilization has not happened as of now. It would have been reflected in working capital utilisation if there was any pickup.
  • Speaking about sector growth, he says, only three sectors have proposals with SBI – roads, solar and city gas projects or oil and gas.
  • Speaking about Jet Airways, he says, it has been left to resolution professional. If the RP decides to go for one more round of bidding, then the bank will make one more attempt.
  • The pace of referrals with National Company Law Tribunal (NCLT) will come down. There are not many cases now that are ₹1,500 crore and above.
  • Speaking about steps expected by government or RBI to revive growth, he says, some sector-specific steps are required, telecom issues need to be sorted out.
  • In terms of recoveries, the coming quarters are going to be the best. 2018 was the best year in terms of NPA provisions and 2020 will be best year in terms of recoveries. 2021 onwards things will be normal unless there is a major shock.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of SBIN was ₹ 339/- as of 02-January-20. It traded at 1.3x / 1.2x / 1.0x the consensus Book Value for FY20E / 21E / 22E of ₹ 251/ 281/ 322 respectively.
  • Consensus target price of ₹ 376/- implies a Price to Book multiple of 1.1x on FY22E Book Value of ₹ 322/-.
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22 Nov

Corporation Bank: Margins to expand on recoveries

Excerpts from an interview of Ms P.V. Bharathi, Managing Director, and Chief Executive, Corporation Bank with CNBC-Tv18:

Update on the Indian Equity Market:

On Thursday, NIFTY closed -0.3% lower. Among sectoral indices, NIFTY Metal (-2.2%), NIFTY Auto (-1.0%), and NIFTY FMCG (-0.6%) closed lower. While NIFTY Media (+4.1%), NIFTY Realty (+0.6%) and NIFTY Financial services (+0.3%) closed on a positive note. The biggest losers were BPCL (-6.0%), Coal India (-3.4%), Tata Steel (-3.3%) whereas Zee (+11.7%), Eicher Motors (+2.1%) and Dr Reddy (+1.4%) ended with gains.

  • Speaking about Essar steel judgement Ms P.V. Bharathi said that the Essar recovery which was long pending has now come. The bank expects that by November 2019 around ₹1,300 crore will be coming in.
  • The bank had already targeted recovery of ₹ 6,000 cr, including National Company Law Tribunal (NCLT) recoveries.
  • In the Essar Steel case, the bank has already provided 100% in respect of this account, so the entire amount of recovery will help to improve profit. In this process, the net interest margins (NIMs) will also increase by 40-50 bps.
  • The bank’s exposure to Bhushan Steel is small, it is ₹150 cr. The bank has around ₹2,500 cr exposure to Videocon.
  • The recoveries will increase profit; for the first half of the year net profit was up 24%.
  • Total profit by the end of FY20 would go up to ₹2,000 cr out of which ₹1,300 cr will directly come from recoveries.
  • The NPAs are less than 6%, the bank has been able to bring it down to 5.59% and by the end of FY20, it will be near 5.3%.
  • The targeted loan growth is ₹1,30,000 cr and at the beginning of the year, it was around ₹1,20,000 cr. The bank has targeted 60% growth in RAM (Retail, Agri and MSMEs) and 40% in corporate.
  • Speaking about the merger, Ms P.V. Bharathi said that it is expected to take place from 1 April 2020, once the process of valuation is over then swap ratios will come out.
  • Ms P.V. Bharathi says this is peak period for retail home loan growth as well as vehicle growth.
  • The total exposure to private sector NBFCs is ₹4,000 cr and the  exposure to Dewan Housing Finance Corporation is around ₹500 cr.
  • The bank has factored in around ₹750 cr of slippages in third quarter, last quarter it was ₹950cr.

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