Yes Bank has reported a loss of Rs 18,564.25 crore for the quarter ended December and a loss of Rs. 19,097.78 crore till date. During the corresponding quarter of the previous quarter, the bank had reported a net profit of a little over Rs 1000 crore.

The bank said its deposit base has fallen sharply and non-performing assets have spiked. The bank’s deposit base, which was Rs 2.1 trillion at the end of the September quarter, fell to Rs 1.65 trillion by the end of the December quarter and has now fallen further to Rs 1.37 trillion. The bank has made provisions for slippages in NPAs till March 14.

Gross NPAs jumped to 18.87 percent from 7.39 quarter-on-quarter, resulting in breach of loan covenants on its foreign currency debt and credit rating downgrades. This forced Yes Bank to partly prepay foreign currency loans linked to external credit rating.

The independent auditor’s review report of the bank has flagged concerns on the bank’s ability to continue as a going concern. The bank’s board was superseded by the RBI on March 5 and deposit withdrawals capped at Rs 50,000. The auditor has warned that these measures could “have an impact on the depositor confidence and withdrawal behaviour which is uncertain.”

The RBI’s proposed draft reconstruction scheme on 6 March 2020 mentioned that the bank would be able to write down Additional Tier 1 (AT1) securities amounting to Rs. 8695 crores and utilize them to boost the common equity.

Around midnight on Saturday, Yes Bank sent a separate release to the exchanges, saying that the entire Rs 8500 crore worth of additional tier 1 bonds will be “fully, and permanently written down to zero”, as originally proposed in the draft reconstruction scheme of the bank.

“The final scheme issued by the government of India does not contain any reference to the write-down of the ATl securities. These conditions, along with other matters as stated in the said note, indicate that a material uncertainty exists that may cast significant doubt on the Bank's ability to continue as a going concern,” the auditor review report said.

Several bondholders are opposing the write-down of AT1 bonds and have filed a petition in the Bombay High Court against RBI and Yes Bank, hoping to recover at least a part of their investment.

Under the reconstruction scheme notified by the government, SBI and a clutch of banks—Bandhan, Axis, Kotak, HDFC and ICICI—will be infusing capital in Yes Bank.

The auditor report noted that the results and financial projections for the next couple of years have been prepared by Yes Bank on the assumption that the proposed capital infusion, lines of liquidity provided by RBI and the reconstruction scheme, will help it realize its assets (including its deferred tax asset) and discharge its liabilities in its normal course of business.

”The said assumption of going concern is dependent upon the degree of success of the final reconstruction Scheme, the quantum of capital infused into the Bank and the Bank's ability to stabilise its deposit balances post-withdrawal of moratorium by RBI. Our conclusion is not modified in respect of this matter,” the auditor report said.

Yes Bank has a total deferred tax asset of Rs 8029.2 crore on December 31, 2019. As per the requirements of AS 22-Income Taxes, based on the financial projections prepared by Yes Bank, it is of the view that “there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.” Also, Yes Bank expects to have a taxable profit for the year ending 31 March 2020.

“Our conclusion is not modified in respect of this matter,” the auditor report noted.

Yes Bank has breached the RBI-mandated Common Equity (CET1) ratio which stood at 0.60 percent at the end of the December quarter, as compared to the requirement of 7.375 percent. This was caused by the bank’s decision to enhance its Provision Coverage Ratio, on a prudent basis, above the RBI-mandated levels.

“As per the RBI norms, the breach of capital adequacy ratios is a serious matter and there is uncertainty around the Regulator's potential action for such a breach. Consequently, we are unable to comment on the consequential impact of the above regulatory breach on these financial results,” the auditor report said.

Yes Bank is also examining cases where it appears that former MD and CEO Rana Kapoor may have favoured certain borrowers.

“During the quarter ended December 31, 2019, the Bank identified certain further matters which arose from independent investigations initiated by lead bankers of a consortium on the companies/borrowers allegedly favoured by the former MD and CEO.

The Bank is continuing to analyse the allegations in the whistle-blower complaints including the reports of this external firm along with the matters highlighted by the independent investigations against certain borrowers of the Bank,” the auditor report said.

First Published:Mar 15, 2020 9:30 AM IST