Yes Bank Ltd
NSE:YESBANK
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Yes Bank Ltd
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Ladies and gentlemen, good day, and welcome to YES BANK Limited Q4 FY '21 and Financial Year '21 Earnings Conference Call. Today we have with us the senior leadership team of the bank led by Mr. Prashant Kumar, MD and CEO, YES BANK; Mr. Niranjan Banodkar, Chief Financial Officer; [ Ms. Anita Pai ], Chief Operating Officer; Mr. Rajan Pental, Global Head of Retail Banking; and Mr. Ashish Agarwal, Global Head, Wholesale Banking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Kumar. Thank you, and over to you, sir.
Thank you. Very good evening, and thank you, everyone, for joining the YES BANK FY '21 Earnings call. Before we get started, I hope you and your families are safe and well. It is also important to take a moment and express our gratitude to all the frontline COVID-19 warriors who are tirelessly working for the betterment of the people amidst the resurgence of COVID-19 cases in the country. I am having the top leadership team of the bank with me. This is the first full year results after the reconstruction of the bank and the moratorium imposed in March 2020. During the COVID pandemic, the bank had to solve for liquidity, capital, stressed assets resolution, rebuilding the operating metrics, governance and [ disclosure ]. Most importantly, this has to be achieved while concurrently rebuilding trust with all our stakeholders. The biggest strength was our valuable customer who stood by us through all this new journey of the bank. I would also like to thank more than 21,000 motivated employees, guidance and stewardship of the Board of Directors; strong support from the regulator, State Bank of India; and other investors. Now given this backdrop, we have completed FY '21 with a strong resurgence on the blue metrics. On the liability side, we have been able to grow deposit franchise by 55% to 1.63 lakh crores. We also successfully raised INR 15,000 crores of capital via FPO in July 2020. We have great recovery of INR 4,933 crores during FY '21 from our stressed asset pool. Our operating profit. We have seen a very healthy growth of 42% Y-o-Y on the back of net interest income increase and reduction in operating expenses. Cost-to-income ratio has come down from 66% to 54%. The significantly stronger and robust governance model with changes across organization, processes and the business strategy. We have also concurrently worked towards granularizing the balance sheet. And in FY '21, we have demonstrated this with an advanced mix of retail and MSME at 51%, which is 700 basis points up from the last year. In fact, we have seen the INR 12,000 crores of disbursement in the fourth quarter, and this has been the highest ever for the bank. Having said this, we also continue to support our corporate business with a focus towards grandular and transactional working capital moves. Now coming on to asset equality. We believe that December has been the peak, with March outcomes showing improvement in outcome. Net NPAs, NPIs and other labeled exposures together has come down 20% quarter-on-quarter. And overall, coverage has improved from 68% to 75%. And further, aggregated pool of 61 to 90 days and 31 to 60 days are sequentially lower. Going forward in FY '22, we expect to grow our loans by 15%, with continuing momentum on retail and SME and resuming growth in wholesale banking. We would also like to support this growth through a faster growth in granular and stable deposits towards achieving a CD ratio which would be lower than 100% and CASA ratio of more than 30%. Importantly, in FY '22, a combination of operating profit on the back of expanding margins and continued focus on cost-effective net efficiencies and a minimum cash recovery of INR 5,000 crores would lead the growth aspiration of the bank while ensuring sufficiency in capital buffer. And just to remind you that we also have a capital buffer of 280 basis points sitting in our deferred tax assets. We have put out a comprehensive presentation which showcases our business objectives and strategy in detail, including initiatives we have undertaken in the digital and technology space, which we believe will further propel the brand to meet its objective. I'll give you some of the headlines on some of those key operating performances. We have ended the year with a 42% Y-o-Y growth in operating profit to INR 4,977 crores on the back of healthy earnings trend across net interest income, which is 9% Y-o-Y growth and decreases in the operating cost. Quarter 4 FY '21 operating profits have been only INR 185 crores. And this is mainly on account of interest reversal and accelerated provisioning due to COVID after the verdict from the Supreme Court has come in terms of recognition of [indiscernible] NPAs. Our deposit growth has been regularizing at a fast pace. Our CASA and retail term deposit has grown by 40% Y-o-Y and now INR 94,000 crores. And our total deposit book is 1.63 lakh crore, which has shown a 55% Y-o-Y growth retail asset has grown by 23% Y-o-Y, and -- which is touching almost INR 50,000 crores. And the share of retail asset to total advances as of now is 30% from 24% at the end of FY '20. Additionally, fee income has also grown steadily while increasing deepening deposit relationships with our customers, growth in retail assets and a strong transaction banking franchise. In fact, the core fee income has grown by 22% quarter-on-quarter. And our retail banking fee has also grown by 21% Y-o-Y and has recorded the highest ever quarterly performance. We have seen an absolute operating cost reduction of 14% and a 12% reduction in cost-to-income ratio for FY '21. And this has been driven by a structural improvement in productivity and operating efficiencies. The gross NPA percentage has reduced annually by 140 basis points to 15.4% for the year FY '21. And our net NPAs stand at 5.9% with a PCR of 79%. Our GNPA book or what we call our legacy debt book is now well provided and has also demonstrated a robust cash recovery of INR 4,933 crores in FY '21. Our overdue book between 31 to 90 days has reduced by 28% over the last quarter. We believe that both our asset quality and asset quality recognition has peaked in, and our recovery income will cover for incremental slippage next year. Despite elevated slippages, the bank has prudently made accelerated provisioning, which reflects in the PCR for NPAs at 79% and PCR for NPI at 92%. And because of this strategy of making accelerated provisioning, there has been a net loss of INR 3,788 crores. Despite this, our capital and liquidity position has significantly improved. The CET ratio has remained healthy at 11.2% despite the accelerated provisioning, C/D ratio at 102% as compared to 163% in FY '20. Our average LCR during the last quarter was 114% and we ended the year with an LCR of 122%. Now if you see our asset quality. Our GNPA as on March '21 is INR 28,610 crores as compared to INR 37,869 crores in December '20. And in December '20, when we talked of INR 37,869 crores, that was including standstill NPA of INR 8,322 crores. Our incremental slippage in FY '21 is INR 12,385 crores. And additionally, the other exposures which are from NPIs and ARC zones, et cetera, they stand at INR 1,852 crores as compared to INR 12,755 crores in December '20. In summary, our PCR has improved from 68% to 75% on the total labeled exposure for this quarter. And for the full year, our reported GNP now stand at 15.4 and net NPA, 5.9. As a result of this, our net exposure now stands at INR 14,903 crores as compared to INR 18,613 crores in the previous quarter and which is a reduction of 20%. Our overdue book, if you see 61 to 90 days, is INR 4,661 crores and has come down from INR 6,537 crores in December '20. Our settlement to 60-day book is at INR 9,000 crores and has come down from INR 12,350 crores. Now 47% of our 61 to 90 days book, which is INR 2,200 crores, is this implementation stage of COVID-related restructuring and which we expect to complete in the first quarter. On the recovery side, our specialized recovery team of more than 100 professionals have demonstrated significant track record of recovery amounting to INR 4,933 crores. And this recovery has been granular, comprising more than 100 large and small accounts. We also expect to have a cash recovery of at least INR 5,000 crores in FY '22 as well. Our incremental slippage in FY '21 of INR 12,305 crores, is mainly from the corporate book and primarily comprises of sectors that have been badly affected by COVID, like commercial real estate, hotel and hospitality and public and social infrastructure. And we expect that these effects would bounce back as the economy would recover. So we believe that both our asset quality and recognition has been and -- now beginning to show sign of improvement. Some, say, visibility on the deposits. So our deposits, as I have shared, is 55% growth. And our CASA deposits have grown at 12% quarter-on-quarter. And our CASA ratio is now at 26.1%. The most important thing is our new customer acquisition, which has increased significantly. We have acquired new CASA customers, 6.6 lakhs as compared to 6 lakhs in FY '20.Our retail deposit book continues to stay granular. In the next 3 years, we continue to stay focused on doubling the deposit book and increasing the customer base to almost 3x. We also aim to improve our CASA ratio to 40% and double the cross-sell ratio. Retail and SME advancement has seen a strong growth. Retail disbursement at a high time -- lifetime high of INR 7,530 crores and SME disbursement of INR 4,612 crores. On the SME, we would be continuously focusing this. And we have also seen a strong growth on the credit card franchise also, and the book size has grown by 42% Y-o-Y to INR 1,451 crores. Rural and inclusive business has also grown. And in the next 3 years, we plan to double the retail asset book to 1 lakh crore by FY '24 and -- which would be driven by a combination of internal sourcing, especially increasing the locations into Tier 2 and Tier 3 cities, and also with the help of the digital innovation. Our wholesale book witnessed a strong growth in the noncredit throughput during the year, which is almost 4x quarter-on-quarter. And 100% of the noncredit trade throughput and 93% of the transaction clients are back to the pre-moratorium levels. We continue to granularize our corporate lending book in high quality and opportunities segment and systematically reducing our net advances exposed towards COVID-stressed sectors. And looking ahead, we plan to grow transaction banking fee income faster than the corporate loan book. And while the overall corporate book has declined marginally due to our strategy for debulking and destressing, but we are also focusing on increasing the corporate book selectively and have disbursed more than INR 3,500 crores in quarter 4. We will continue to grow lending selectively in the high quality corporate space and support our clients. We continue to command a leadership position in our payment space. In fact, our share of UPI transaction has increased to 45% from 33% at the end of FY '20. In the last 12 months, the bank has strengthened the technology and data resilience significantly. We transact over 1 billion UPI transactions monthly. We have also built several industry-lending solutions. We finally had the API banking platform that has currently scaled up to 400 -- more than 400 APIs and integrated with more than 3,000 partners. We have also launched the Yes Connect, a bouquet of stand-alone and integrated B2B finance solution with more than 10 partners. We have significantly ramped up our advanced analytics capability during the last 12 months and are generating revenue. We have set up a centralized data analytics and governance team and led by a newly appointed Chief Data and Analytics Officer who is driving more than 15 use cases and multiple models across personalization, risk and process. And we have also seen more than 3.5 lakh customers to be cross-sell via these figures. On the cost management side, we would continue to work on the reduction on the cost side, which will be mostly on the nonemployee side. On the people side, it's a very, very challenging time, but we have realigned our compensation and HR process. And we have already completed the appraisal process for FY '21, which includes issuing the increment later for more than 20,000 employees in the first week of April itself. A significant proportion of our senior management compensation has now been made variable and linked to the long-term performance of the bank. We have also moved towards the work from anywhere regime, which will not only provide improved flexibility and support during these trying times, but I think it would also help us in bringing more cost efficiencies going forward. We are supporting our employees in -- during these trying times on multiple fronts, including free vaccination, webinar session for -- with medical professional for both employees and customers and also arrangement for the RT-PCR and also in terms of providing the best medical facilities to our staff. We have also taken a number of measures in terms of improving the governance and this is coming out of our learnings from the past. I will just recap our priorities for FY '22. In order to achieve our medium-term objective, which is the retail MSME mix of more than 60%, CASA ratio of 40% plus and the ROE target of 1% to 1.5%, our FY '22 aspirations, I would just again recapitulate, focus on advances growth while continuing to improve on granularity. So we are targeting a 20% growth in retail . We would also be resuming growth on the corporate side and we would be targeting at a 10% growth. The deposit to grow faster than loans and C/D ratio would come down below 100%. And the CASA ratio would be more than 30%. And we are absolutely on the trajectory to reach a RoA of 1% by FY '23. And FY '22 would see ourselves on the RoA trajectory in that road map. I would stop here and wish you all very good health and have a safe and prosperous FY '22. And now we can open the floor for your questions.
[Operator Instructions] The first question is from the line of Mahrukh Adajania from Elara Capital.
Sir, last quarter, you had talked about a possible equity issuance. So if that's still on the cards, then what will be SBI's role in that -- I mean very soft or hard commitments? And what are the plans on any new equity issuance?
So as of now, our CET is 11.2%, which is having a 300 basis point comfort over the regulatory requirement. In the FY '22, our recoveries would take care of our credit cost. So any capital consumption would be only for the growth purpose. And the way we are targeting the growth of 15% on our loan book, our capital would meet that requirement, keeping it more than the regulatory requirement. But during the year, because our year would be very tricky because of the current situation, if we come across a higher growth opportunity, then we would definitely examine this part because we would not like to lose -- leave the growth opportunities for shortage of schedule. So as of now, I think we are well for all the capital.
Got it. Sir, if you could just remind me on what is the agreement with SBI on fresh capital raise, as in, would they participate? Or it's just going to be a general open market issue? Or if there is one for growth?
So one part [indiscernible] so it's not about [indiscernible] just if you go there and if you see the reconstruction scheme of the bank, SBI is supposed to seek a minimum 26% capital for next 3 years, which is up to FY '24. Okay, that is the reconstruction scheme. But what I like -- I was sharing with you as of now, we don't see any need to raise capital. But going forward, if there will be any requirement for growth purpose, at that point of time, we would evaluate that.
Sure, sir. Sir, and one more question is on the stress. So even excluding your restructuring, the stress book is still high. And given that we are in the second wave, what is the early assessment on the second wave? So even with the second wave, we are expecting recoveries to exceed slippages?
Yes. So first, in terms of impact of second wave, too early to maybe comment, but we are absolutely confident that recoveries would be taking -- it would be more than that slippage. And we have done a very, very detailed analysis of our book, which is in the [indiscernible] position.
Got it. And Sir, can you throw some more color on recoveries? I mean, not account-wise, but maybe sector-wise or any 1 or 2 lumpy accounts or any such thing? Or what is being resolved under NCLT? Or any such color?
So this recovery cash INR 4,933 crores, this is over more than 100 customers. And this is across different segments. So I think on our entire book, first year, like we have already started engaging and results would start showing in much better way than in the current [indiscernible].
The next question is from the line of Suresh Ganapathy from Macquarie.
First is just trying to reconcile certain numbers. So your total gross labeled exposure is INR 41,000 crores on which you own -- sorry, you provide -- you have provided INR 26,000 crores, in that sort of 64% coverage, right? So that's the reported -- on a reported basis. On top of that, you have about INR 13,000 crores of overdue book, on which you may carry about INR 230 crores of provision, considering the kind of overlap you have with the restructuring book and you made 10%. Am I right on that INR 30,000 crores you carry INR 230 crores?
Yes. So on that pool, yes, we have a INR 2,200 crore like implementation exposure on which we are carrying a 10%.
Yes. So there is -- Niranjan, no, nothing over and above this INR 2,220 crores which you carry on the INR 13,000 crores book. No COVID, no contingent, nothing like that, right?
So we have not made any contingent provisions on this overdue book because of 2 reasons. First, life on our book, which has been recognized as NPA. We have already read the executive provisioning and our provision coverage is 79% on that book. So we had 2 options. One option was to make a minimum regulated provision on the existing book and also make some prudent provision on the overdue. But we have taken a call to make an accelerated provision on the existing book. So there's a -- going forward, our credit cost on account of this book would not be impacting the earnings FY '22.
Okay. So I just want to elaborate on the earlier question because we, of course, know the second wave is very unpredictable. And some of the best banks in the system, large banks, don't have an SMA book of more than 1%. And still they are struggling to reach 1.5% RoA. You have an SMA book of 8% and you are still guiding a 1% to 1.5% RoA and with such a massive second wave going on. How confident you are that you can reach this kind of level? Because you're really talking about the best-in-class RoA for a banking system. Are you really confident that you can meet this? And also, if you can tell how has been the April SMA book? I mean you would have some color, right, whether this INR 13,000 crores have moved or not upwards because of the current stress that we are seeing?
So first part, our guidance on RoA of 1% to 1.5% is not for FY '22. I think this is a medium-term guidance. And definitely, our guidance of 1% RoA for FY '23 is absolutely intact. And despite COVID, I think what we have projected in the early 2020 financial year, we are absolutely on track on that. So that is one part. Second thing, if you see the INR 13,000 crores of book, which is in the overdue. So out of INR 13,000 crores, almost INR 2,200 crores is already identified for restructuring, okay? You can take that part out. Almost INR 2,000 crores have already become 0 DPDs. We have analyzed the entire book account by account, and these account used to be in overdue position always, traditionally. So we are not seeing any risk in terms of their slippage. But what we are saying in terms of second wave or maybe going forward, we really can't comment in terms of what would be the COVID impact going forward. So this is something which is uncertain. But as of now, we are quite confident.
Suresh, if I can also add one point. I mean if I look at, let's say, the 61 to 90 days, and if I just remove the INR 2,200 crores of the restructuring, we are left with about to INR 2,400 crores of exposure. And as Prashant also said that there has been some regularization as well. But let's stick to that INR 2,400 crores. That's about a 1.4%, 1.5% of SMA-2 which has reduced. And I'm saying is if you look at the full construct of the entire lost label, you add everything together, it is actually a reduction from a sequential basis and increase in the coverage, right? And 1.4%, 1.5% is -- I mean it's [indiscernible] number from an SMA-2 performance and not necessarily reflective of a stress that will definitely [indiscernible].
The next question is from the line of Ruhi from Reliance Nippon.
Yes, sir, so my question is, basically, there were a couple of court cases post the reconstruction of the bank happening last year. So at present, what would be the status of those cases? And will there be any liability on the bank which they would have to bear because of these court cases?
So I am aware of only one type of court cases. Court cases are several, but it is only related to AT1 bond. And I think in Madras High Court, the decision was taken in terms of whether they have uphold the decision of the bank in terms of writing down the AT1, okay? But they are cases which are pending in different cases. So as of now, there is no such claim on us that we don't see any liability of the bank as of now. But this matter is subdued, we would not like to make any other comment.
The next question is from the line of Piyush, a retail shareholder. .
Sir, actually, I'm holding the fair impact loss of sale from last 3, 4 years. But as a retail shareholder, I'm not getting the value as of now. After the change of management also I'm not getting the value. So what can I expect going forward, whether it will -- whether I should get the value or no?
So there is one thing we can always assure you, that from the bank side, we are continuously strengthening the balance sheet, okay? Because if you [indiscernible] our entire existing group a provision coverage of 79%, and on the investment side, it is 92% provision coverage. It's a very, very -- it's a healthy part of the balance sheet. And if you see, we are growing on both retail and deposit side and also on the loan side. And our operating profits have grown up by 42%. So the issue is only in terms of timing. So I think I can assure you from the bank, we are continuously improving on the business front. We are continuously cleaning the balance sheet. And this is the only thing I can say, assure you or share with you, how to the [indiscernible] share market, it's very, very difficult [indiscernible].
That's fine, sir. But as a retail shareholder, I have lost everything. Actually, my age is now 28, but I have lost everything in YES BANK, sir. So that's why I'm worrying, and I'm talking like this.
No, no, I absolutely share your concern. But I think I would request you to see from a perspective when bank was about to close down and the kind of progress the bank has made in a period of [indiscernible].
[Operator Instructions] The next question is from the line of Jai Mundhra from B&K Securities.
Thanks for the details. Sir, on Slide #6 where you have given the overdue book, this INR 4,609 crores, is this -- I mean, the credit reporting? Or this is the entire bank book?
This is the entire bank book.
Sure, Sir. And second question is on slippages, sir. Out of this INR 12,000 crores, barring 15%, 14%, which is retail and granular, 85% seems to be from corporate sector. Now if we hear the commentary from other banks, wherein the corporate businesses have been very, very negligible for them, it looks like that the corporate slippages that you have are mainly particular to YES BANK. Is that way or your slippages also are at system level? I mean, I'm just trying to reconcile, because other banks, other frontline large private banks, they have not shown any corporate slippages.
So our slippage is mostly related to those industries who have been severely affected because of the COVID. So like the hospitality part, real estate, okay? Anything which is related to tours and travel, okay? So any industry which has been deeply affected because of the COVID, our slippage is mostly related to that.
And you would be the sole banker, right, to these corporates? That is how -- that will explain the, let's say, slightly more [indiscernible]. Is that right or not necessarily?
So it's a mix. In some of those assets, we are the sole banker. In some of the assets, we are participating with other banks.
The next question is from the line of Mahesh M.B. From Kotak Securities.
Just a few questions from my side. One is, can you see the recoveries that you're putting out there, about INR 2,500 crores, is it still kind of going at the provisioning level that is done? Or do you think that it is underprovided or you've had to make more provisions on it?
You are talking about the restructuring book?
No. The resolution that you're doing today, is the provisioning that you've done so far on those accounts, is it holding up? Or you have had to make more provisions on it?
So, Mahesh, if you see our recovery, our recovery, we have been able to have 50%, almost 50% to 60% recovery. And whereas provision coverage is 79%. So our belief is that in all the accounts, our provision coverage is more than the [indiscernible].
And on the INR 28,610 crores INR of gross NPA [indiscernible], do you think that you have to make provisions for FY '22?
So I think what we have done, we have taken care of all the aging securities, all those things. So as of now, we don't believe that we would be required to make any provision on the [indiscernible].
So you can go with FY '22 with no provision on this book?
So this is held in our strategy, not to carry any burden of the existing book in -- for the new year revenue.
Perfect. And one question. March tends to be typically a vis-a-vis better quarter for most times on 60 to 90 and 30 to 60 day books. You think this number has also ceased out here? Or you think that when we get into, let's say, first half, this number goes back to a higher number?
[indiscernible] book.
So I think as of now -- because if you see last 10 to 15 days, this was something nobody was expecting, okay? And let's see what would be the impact of this, then we would be more clear about the book OT.
Okay. So one last question from my side. You think you have some -- you've reached the point wherein you can further cut down the retail deposit rate because the extent of divergence which is sitting there with the larger banks is high and expected to be so. Do you think you've reached a point where you can cut it a little bit further and see if you can move the margins up?
So we are continuously reducing rate of interest on our term deposits. It's a continuous process. So I think we have also taken a decision in the last [indiscernible] to cut the deposit rate by further 25 basis points. So this is a continuous strategy we have there.
The next question is from the line of Aakriti Kakar from Goldman Sachs. .
This is Rahul. I hope you all are staying safe, families and friends, et cetera. Got a couple of questions here. Number one is on the slippage reconciliation. So basically INR 11,800 crores that you've got, the standstill last quarter was INR 8,300 crores odd something. So the additional slippages have come through in this quarter, part of it is explained by retail. But the other part is what? Coming from the SMA portfolio, SMA-2 portfolio?
Yes, mostly.
Okay. Got it. The second, sir, can you just talk us about the write-off policy that we are pursuing because we've written off quite a bit in this quarter. So when the recoveries are also happening at the same time, can you just help us understand how do we think about these write-offs? Is it for the cash purposes or it is for the lack of certainty about the recoveries?
So it is more from the balance sheet management. It's not about lack of, let's say, recovery, let's say, profit. So I think recovery on these technical return of account would also be similar to the recovery which is happening in the other asset. It's more about the balance sheet management.
Okay. And we will pursue this strategy even in the next year. Is that a fair interpretation?
Yes.
Okay. Got it. And sir, in the previous question, you said the recoveries or the haircuts are about 50%, but we're carrying 70%, 75% of provisions. So does it mean that when we start to kind of see a cycle where slippages go down, we would start possibly having some recoveries also, the write-backs from the excess provisions?
Absolutely. Absolutely. If you see out of almost INR 5,000 crores of cash recovery, the positive effect on the P&L and [indiscernible] to the extent of almost INR 3,000 crores.
Okay. And the book from which is this has been recovered is about INR 10,000 odd crores?
So both NPAs and NPIs from there the recoveries the have been made, so we have been able resolve to the extent of almost INR 8,000 crores.
Okay. Got it. Got it. That's helpful. Sir, one more question on this SMA-2 portfolio, which just came down from INR 6.5 crores to 4.6 -- I mean, 4,500 crores. And equally, the SMA-1 portfolio. So there must have been some additions also that would have happened in the SMA-2 portfolio, right, during this quarter. Can you share that number? How much of that has been, in the last quarter?
So Rahul, there is -- I mean, there is a flow that happens into that book, there is as a flow that moves out as they get rationalized. But I think the way we can look at it, is if you look at the net exposure, and even if you were to add, let's say, the 61 to 90 and the 31 to 60 just conservatively add to that total pool, if you look at the total stock, that is sequentially moving lower. So that is not increasing, and that is why Prashant Sir also said [indiscernible] at the start that we believe December was the peak. And both from the total pool as well as the provisioning coverage on that pool, both have improved sequentially.
So let me ask another way. So the reduction that we have seen from, let's say, INR 19,000 crores to INR 13,000 crores, some of it, of course, is slipped into NPA. But the other would have been repaid back to us where we would have reduced exposure, et cetera? Or -- I'm just trying to understand the drift of it, let's say, getting into next year because of -- as everybody has been asking about the second wave. I mean, what could be the flow-through that we can see into these numbers?
So see the guidance that we have already put out in the presentation is to say the recoveries that we will look at for next year should outpace the slippage that we will have. And look, slippage can happen from the overdue book, sometimes it is also from outside. But when we look at the full book, we don't expect the slippage to actually excuse this company. So from a total addition to this book, we are not expecting anything. On the contrary, we should start seeing a reduction in this absolute book for FY '22.
That's useful. Just one last question. So the RBI didn't perhaps allow us, as per the media reports, to float a bad bank kind of NDT. What other alternate do we have before us wherein we can resolve all these written off accounts, the stress book, et cetera, of [indiscernible] in a different and expedited manner over the next 12 to 18 months or 24 months or whatever?
So I think we would be able to continuously resolve this within the bank, okay? So -- but only then -- that option is still live, and we will be waiting for more clarification to come from regulator after the report of the expert committee, which they have made would come out.
Okay. So that option is still open. You're just waiting for the committee report. And if that sector opens up then, this is still a possibility before us?
Exactly.
[Operator Instructions] The next question is from the line of Saumya Agarwal from Smartkarma.
Am I audible?
Yes, please.
So sir, while I understand your legacy corporate book has been a pain point for quite some time now and you are looking at alternates to resolve it. On the scale front, since you're targeting to grow this book, retail and SMA-2 [indiscernible] segment from here on, what exactly is your assessment of the on-the-ground situation? Because if I look at some of the larger private sector banks, most of them are going slow on this segment. So what is your assessment of the retail book as of now amid the pandemic?
So we have been very selective in terms of identification of the customers and also in terms of the product. So if you see, our unsecured proportion in the retained asset is lower as compared to the other market players, okay? So we would continue to be selective in terms of identifying the better-quality customers. Advantage to us is that our base is small, just INR 50,000 crores. And we can choose to grow with a good growth number, but with the quality.
Okay. Sure. And just one more question following up on the bad bank angel, I suppose there should some kind of arrangement we reach between YES BANK and RBI to set up a bad bank. How exactly will you be treating the legacy assets? Would the entire book get transferred to the bad bank and just clean up your balance sheet at one go, albeit with some haircut? How exactly does the structure work?
So I think we would love to do that. But we need to wait for the clarity which would come from the regulator on the entire framework related to [indiscernible].
The next question is from the line of Sri Karthik from Investec.
Three questions from my side. The first one is, last quarter you highlighted about INR 8,000 crores of possible restructuring. What has happened to those accounts? That is one. Second, if you could break up the SMA-1 between corporate and noncorporate?And the last one is how [indiscernible] of quarterly PPOP run rate. At what level do you think you'll stabilize from next quarter onwards?
Look, Karthik, first, on the restructuring book, I think our restructuring book has come down to INR 2,500 crores because most of the other accounts, they have paid the overdue and there is no requirement for any restructuring. And, if Niranjan you can share the other [indiscernible].
It is predominantly on the corporate side.
So. No, anything...
[indiscernible]
No. It's SMA-1 between corporate and noncorporate. Do we have...
One second. [indiscernible] Karthik, I'll have to come back to the specific number.
Myabe you can share [indiscernible]. And on the PPOP?
So it is about 80% -- 85% is corporate, and rest is between medium, SME and retail on [indiscernible]. Okay. On the PPOP, Karthik, if you just look at, let's say, what we have delivered for fiscal '21, so we've delivered basically a total income of about INR 10,700 crores. And this does take into account the fact that we've had slippages. So reversals are also completely baked into this. So just from a run rate of a normalized PPOP, there's about INR 1,000 crores of interest recovery that we've had. So that's about INR 6,400 crores of, let's say, core PPOP -- core interest that we will have. That will translate to about INR 1,600 crores of NII. And I'm just looking at [indiscernible] the average delivery across the 4 quarters. We've had about INR 3,300 crores of fees for this year. Again, we have about INR 1,000 crores of gain on sale investments. Again, I'm keeping that aside for the time being. That takes about INR 2,300 crores, INR 2,400 crores of core noninterest income. So INR 1,600 crores of NII, about INR 600 crores of fees that we're looking at, at the core level, that's about INR 2,000 crores of total revenues. Again, operating expense, if you use the same lens, that's about INR 1,500 crores of operating expense that we will look at. And if I were to kind of add all of this, we are -- at a very core level, we are looking at about our INR 600 crores to INR 700 crores of operating profit. And I'm just saying as a base case. We can start adding back because there will be some gain on investments that will typically happen in the normal course. That can be about anywhere between, let's say, INR 200 crores, INR 250 crores on a quarterly basis. And of course, given the fact that we are also looking at a large cash recovery from the NPA pool, there is -- we're also expecting some recoveries that will come through from the interest side, right? So if I start adding some of these, we could -- I mean there's really -- there could be some [indiscernible] not the quarterly, but we could be looking at an average PPOP anywhere between INR 1,000 crores to INR 1,200 crores. And this is without the growth.
Ladies and gentlemen, we'll take the last question from the line of Rakesh Kumar from Systematix Group.
Can you hear me, please?
Yes.
Sir, just one small question. We have margin reported for this quarter at around 160 bps. And now we have a total net exposure of INR 14,900 crores. If I just take this number, this is coming close to around 9.4% of the standard asset. So how do we see the margin going ahead from here?
So again, if you look at -- I think a good starting point actually is the fiscal '21, because fiscal '21 does take into account the nonaccruals that we would have had on the stress pool. And that is about 2.8%. Of course, this does include some element of interest recoveries that we would have had from the NPA pool. But margin structure for us clearly at this point in time is a function of improving CASA. We will continue to keep recovering from our NPAs or any collections that flow into NPAs will add to the interest income. But at a very core level, it's the cost of funding that we want to drive very emphatically, in fact in an earlier question, we did speak about how we are reducing our both term deposit rates and saving account rates to kind of play into the margin. So both a function of reducing rates and improving mix of CASA is what will add to our margins. And we believe that you want keep adding about 25 to 30 basis points of core margins on an annualized basis.
Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. Prashant Kumar for closing comments.
So thank you very much for all of you for taking this time out for joining this call. And I would again like to reiterate that there has been a lot of improvement on all the [indiscernible] in terms of performance. But because of our strategy in terms of taking a provision upfront, we are showing a net loss in the fourth quarter and for the entire financial year. I wish you a very, very good time going ahead and be very safe, take care of -- and your family members and other loved ones. Thank you so much.
Thank you very much. On behalf of YES BANK Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.