The Reserve Bank of India (RBI) placed Yes Bank under a moratorium on 05 March 2020, restricting withdrawals to Rs 50000 per depositor till 3 April. It also superseded the board and placed it under an administrator, Prashant Kumar, former deputy managing director and CFO of SBI. The government notified the scheme of reconstruction for Yes Bank on 13 March 2020. As per the reconstruction scheme, Yes Bank's authorized share capital will be revised upwards to Rs 6200 crore. The order of moratorium on the reconstructed bank shall cease to have effect on 18 March 2020 at 18:00 hours.

Asset quality deteriorates sharply: Bank has witnessed steep increase in GNPA and NNPA ratios in Q3FY2020.

GNPA ratio increased 1148 bps qoq to 18.87%, while NNPA ratio inched up 162 bps qoq to 5.97% at end December 2019.

Fresh slippages ratio zoomed to 11.98% in Q3FY2020 from 2.58% in Q2FY2020 and 0.95% in Q3FY2019.

Restructured assets book eased on sequential basis at Rs 184.00 crore (0.09% of the advances) at end December 2019 from Rs 221 crore end September 2019 and Rs 210 crore end December 2018.

The securities receipts on the banks book notched up to 0.72% at end December 2019.

The bank has exhibited substantial increase in provision coverage ratio to 72.7% end December 2019 from 43.1% end September 2019 and 44.2% end December 2018.

The bank expects slippage of up to 5% for FY21 and normalization thereafter.

Business volume dips: The business of the bank dipped 25% yoy to Rs 351854 crore at end December 2019. Deposits plunged 26% to Rs 165755 crore, while advances declined 24% to Rs 186099 crore at end December 2019.

Credit-deposit ratio of the bank increased to 112.3% at end December 2019 from 107.2% a quarter ago and 109.5% a year ago.

Retail loans up, corporate loan book dips: The corporate loan of the bank dipped 38% to Rs 90965 crore, while IFSC Banking unit loan book also declined 21% to Rs 15346 crore end December 2019. The MSME loan book of the bank has also declined 6% to Rs 38766 crore, while the retail loan book moved up 11% to Rs 41289 crore end December 2019.

CASA ratio improves: The CASA deposits of the bank declined 28% to Rs 53203 crore, as saving deposits declined 33% to Rs 29764 crore, while current account deposit fell 21% to Rs 23440 crore end December 2019. The CASA deposits ratio improved on sequential basis to Rs 32.1% end December 2019 from 30.8% end September 2019, while eased from 33.3% end December 2018.

Margins dip: Bank has exhibited sharp decline in the net interest margin (NIM) to 1.4% in Q3FY2020 from 3.3% in the corresponding quarter last year. Yield on advances declined 180 bps yoy 8.4%, while cost of funds rose 10 bps yoy to 6.6% in Q3FY2020.

Network expansion: The bank has network of 1132 branches and 1459 ATMs end December 2019. Total headcount of the bank increased to 24687 employees at end December 2019 from 24211 a quarter ago and 21182 at end December 2018.

Book value per share stood at Rs 20.3 per share at end December 2019. Adjusted Book Value (adjusting for NNPA and 10% of restructured assets) was at Rs 11.5 per share.

Quarterly Performance:

NII dips on higher slippages and plunge in margins: For the quarter ended December 2019, the bank has reported 60% dip in NII to Rs 1064.78 crore. NIM dipped to 1.4% in Q3FY2020 from 3.3% in Q3FY2019 causing dip in NII for Q3FY2020. The interest income dipped 29% to Rs 5642.84 crore, while interest expenses fell 13% to Rs 4578.06 crore.

Non-interest income declines: The non-interest income of the bank declined 30% on yoy basis to Rs 625.66 crore in Q3FY2020. Corporate Trade & Cash Management dipped 38% yoy to Rs 138 crore, while forex, debt capital markets & securities increased to Rs 8 crore from loss of Rs 160 crore in Q3FY2019. The corporate banking fees (financial advisory fees) dipped 81% to Rs 91 crore, while the retail banking fees rose 8% to Rs 381 crore in Q3FY2020.

Net total income of the bank plunged 52% to Rs 1690.44 crore in Q3FY2020.

Expense ratio zooms: The operating expenses of bank have increased 8% to Rs 1696.86 crore driven by 12% rise in other operating expenses to Rs 1056.62 crore in quarter ended December 2019. The employee cost increased 2% to Rs 640.24 crore. The expense ratio zoomed to 100.4% in Q3FY2020.

The bank has recorded operating loss of Rs 6.42 crore in quarter ended December 2019.

Provisions jumps: Provisions and contingencies zoomed to Rs 24765.73 crore for Q3FY2020. The pre-tax losses came in at Rs 24772.15 crore in Q3FY2020. The bank has made provisions of Rs 22328 crore NPAs and Rs 2239 crore investment book. The bank has also made other provisions of Rs 380 crore, written back standard asset provisions of Rs 182 crore in Q3FY2020.

With the jump in provisions, the pre-tax loss came in at Rs 24772.15 crore in Q3FY2020.

The bank has written back tax provisions of Rs 6211.84 crore, helping to reduce net loss to Rs 18560.31 crore in quarter ended December 2019.

Financial Performance 9MFY2020:

For the nine months ended December 2019 (9MFY2020), the bank has posted net loss of Rs 19046.63 crore. The net interest income declined 24% to Rs 5531.54 crore, while non-interest income dipped 30% to Rs 2844.24 crore in 9MFY2020. The expense ratio jumped to 59.3% in 9MFY2020 compared to 40.0% in 9MFY2019. The operating expenses increased 9% to Rs 4964.67 crore, while provision and contingencies jumped 1218% to Rs 27886.09 crore. The pre-tax losses came in at Rs 24474.98 crore in 9MFY2020. The bank has written back tax provisions of Rs 5428.35 crore, helping to reduce net loss to Rs 19046.63 crore in 9MFY2020.

Notes

The book value of HTM investment sold during the nine months ended December 2019 was Rs 20236.2 crore. The market value of investments (excluding investments in subsidiaries) under HTM category was Rs 37047.4 crore and was higher than the book value thereof as at December 2019.

The Bank has a total deferred tax asset of Rs 8029.2 crore end December 2019.

Based on the Scheme notified under subsection 4 and subsection 7 of section 45 of Banking Regulation Act, 1949, contractual terms and legal assessment, the Bank believes Additional Tier 1 bonds amounting to Rs 8695 crore can be utilized to enhance the common equity of the Bank as of date With the said capital infusion and consideration of the Additional Tier 1 bonds, the concerns around the liquidity and capital adequacy will be mitigated and the Bank's ability to grow its business will substantially improve thus resulting in sustained profitability in the future.