Troubled private sector lender Yes Bank posted a record-high loss of Rs 18,564 crores for the quarter ended December on the back of a steep rise in bad loans.

Declaring its numbers just an hour before midnight on Saturday, Yes Bank said its deposit base has shrunk by almost Rs 72,000 crores between October 1, 2019 to March 14, 2019, and gross bad loans risen to Rs 40,709 crores as of Q3 from Rs 17,134 crores in the previous quarter.

The bank also disclosed that it has received investment commitments of Rs 10,000 crores from State Bank of India and seven other private sector banks.

Putting to rest any ambiguity surrounding the treatment of its Basel III compliant Additional Tier 1 bonds, the bank clarified that they would have to be written down to zero before any reconstruction of the bank is undertaken.

Here is all you need to know about the bank’s third-quarter numbers.

LOSS

The bank posted a historic high loss of Rs 18,564 crores during the quarter ended December, compared to a profit of Rs 1,001.8 crores in the same quarter last year. It also posted an operating loss of Rs 6 crores for the quarter, compared to an operating profit of Rs 1,990 crores during the same quarter in FY19. In the preceding quarter, Yes Bank had posted a loss of Rs 600 crores.

If it wasn’t for a tax write-back of Rs 6,214 crores, the bank would have posted an even higher loss of Rs 24,778 crores.

ASSET QUALITY

Yes Bank’s gross non-performing assets (NPA) rose to Rs 40,709.20 crore compared to Rs 17,134 crores in the previous quarter. Its Gross NPA ratio stood at 18.87 percent of the bank’s total loan book versus 7.39 percent in the previous quarter. The net NPA rose to Rs 11,114 crores, or 5.97 percent of net advances, from Rs 9,757.20 crore in the September quarter.

The Gross Slippages for the December quarter stood at Rs 24,587 crores, and recoveries & upgrades at Rs 917 crores.

The bulk of the slippages were from its Corporate loan book. Rs 39,501 crores of loans that turned bad in Q3 were from the corporate book. Slippages from the retail book stood at Rs 576 crores, and from MSME at Rs 642 crores.

The Slippage Ratio stood at 11.98% as of December quarter versus 2.58% in the previous quarter.

Its SMA-1 (Special Mention Accounts) book, ie loans with dues outstanding for 30-60 days, stood at Rs 11,528 crores as of Q3 versus Rs 21,419 cr in Q2. The SMA-2 book, which is loans outstanding for 60-90 days stood at Rs 2,383 cr in Q3 vs Rs 3,018 cr in Q2.

The bank also sold Rs 622 crores of loans to Asset Reconstruction Companies (ARCS) in Q3.

Yes Bank has given a slippage Guidance of up to 5% for FY21 and normalization there after​.

PROVISIONS

The bank set aside provisions of Rs 24,765 crores in Q3 vs Rs 1,336 cr in Q2. The provision/write off for non-performing advances stood at Rs 22,328 crores for Q3.

The bank said it decided to take excess provisioning during the quarter, ona prudent basis, over and above RBI’s requirement, and as a result the Provision Coverage Ratio of the bank stood at 72.7% as of December 2019 vs 43.1% in the previous quarter.

CAPITAL ADEQUACY

The capital adequacy of Yes Bank fell sharply to 4.2 percent in Q3 compared to 16.3 percent in the second quarter, and the Core Equity Tier-1 ratio dropped to 0.6 percent at the end of the quarter compared to 8.7 percent in the September quarter. The statutory liquidity ratio has breach RBI’s minimum capital requirement by a wide margin. RBI requires banks to maintain a total capital adequacy ratio of at least 9 percent, and CET-1 of 7.375 percent.

As a result, the bank paid a penalty of Rs 86 crores to RBI.

However, if the bank were to include the proposed investment commitment of Rs 10,000 crores from SBI and seven other private banks, then its Capital Adequacy Ratio would improve to 13.6 percent, with CET-1 at 7.6 percent.

DEPOSITS

Yes Bank saw a significant flight of deposits during the third quarter, and even after, resulting in a depletion of Rs 71,991 crores in its deposit base between October 1, 2019 to March 5, 2020.

The bank’s outstanding deposit base stood reduced to 1.65 lakh crore as of Q3 from Rs 2.09 lakh crore in Q2, registering a fall of 21 percent QoQ. The bank further saw an outflow of deposits , and its total deposits stood at Rs 1.37 lakh crores as on March 5.

ADVANCES

The bank’s assets shrunk to Rs 2,90,985 crores as of Q3 from Rs 3,46,572 crore in the previous quarter, and Rs 3,73,981 crore in the second quarter of last year, registering a drop of 16 percent sequentially, and of 22 percent over the previous year.

Advances fell by 24 percent over the previous year and by 17 percent from to Rs 1,86,099 crores in the December quarter. Domestic corporate advances stand at Rs 90,695 crores, down from Rs 1,46,001 crores the previous year. Retail book stands at 21 percent of total advances in Dec 2019 from 15 percent in December 2018.

INCOME

Net Interest Income fell by over 60 percent from the previous year, and stood at Rs 1,065 crores during Q3. Higher slippages and reversal of accrued interest caused this sharp fall.

Non-interest income fell to Rs 626 crores in Q3, down by almost 30 percent from last year. The total income stood at Rs 1,690 crores as of December versus Rs 3,557 crores during the same quarter last year.

MARGINS

Net Interest Margins stood at 1.4 percent in Q3, down from 2.7 percent in Q2- down 134 basis points, largely on the back of a steep rise in bad loans.

FUNDRAISING

In a separate statement to the exchanges, Yes Bank said it had received investment proposals worth Rs 10,000 crores from eight investors, including State Bank of India.

The lender said that State Bank of India would be allotted 605 crore shares at Rs 10 each, to take its investment to Rs 6,050 crores in Yes Bank. This is lower than Rs 7,250 crores of investment commitment SBI had earlier disclosed to exchanges. SBI’s investment of at least 26 percent stake will be locked-in for 3 years.

Seven other private banks will also be chipping in. ICICI Bank and HDFC Limited will each bring in Rs 1,000 crores, Axis Bank another Rs 600 crores, Kotak Mahindra Bank Rs 500 crores, Federal Bank and Bandhan Bank Rs 300 crore each, and IDFC First Bank another Rs 250 crores. The investment from these seven banks will total Rs 3,950 crores. These seven banks will also be locked-in for 75 percent of their investment for three years.

ADDITIONAL TIER-1 BONDHOLDERS

Putting to rest all doubts regarding the treatment of Basel III compliant Additional Tier-1 bonds, Yes Bank issued a separate release to exchanges saying they would be written down completely, as originally proposed in the draft reconstruction scheme of the bank. Here is the full text of what the bank said in this matter.

“As per the provisions of the Master Circular - Basel III Capital Regulations dated July 1, 2015 issued by the RBI, ("Basel III Circular"), more specifically, clause 2.15 of Annex 16 of the Basel III Circular, If the relevant authorities decide to reconstitute a bank or amalgamate a bank with any other bank under the Section 45 of BR Act, 1949, such a bank will be deemed as non-viable or approaching non-viability and both the pre-specified trigger and the trigger at the point of non-viability for conversion/write-down of A T1 instruments will be activated. Accordingly, the AT1 instruments will be fully converted/ written-down permanently before amalgamation/reconstitution in accordance with these rules.

Given that Section 45 of the Banking Regulation Act, 1949 has been invoked by the RBI and the Scheme has been notified, the Bank is deemed to be non-viable or approaching non-viability and accordingly, the triggers for a write-down of certain Basel III additional tier 1 Bonds(" AT 1 Bonds") issued by the Bank has been triggered. Such AT 1 Bonds would need to be fully written down permanently before any reconstruction of the Bank is undertaken.

In light of the above provisions of the Basel III Circular, the Perpetual Subordinated Basel III Compliant Additional Tier I Bonds issued by the Bank for an amount of Rs. 3,000 crores on December 23, 2016 and the Perpetual Subordinated Basel III Compliant Additional Tier I Bonds issued by the Bank for an amount of Rs. 5,415 crores on October 18, 2017 have been fully written down and stand extinguished with immediate effect.”

First Published:Mar 15, 2020 9:37 AM IST