Oh no, Yes Bank. You don’t get to spin a yarn about the wonderful quarter you’ve had.

You don’t get to fill page after page of your earnings presentation with arrows pointing up, up and up. The bragging about how you are the world’s second-most-social brand (whatever that means) can also wait.

There’s only one question for you to answer. Actually, make that two.

First, how does Yes Bank Ltd even begin to justify that the regulator, the Reserve Bank of India (RBI), found non-performing assets to have been four times as large on 31 March than was then acknowledged in audited results?

Second, how did the management credit committee, packed with such stalwarts as the managing director, the chief risk officer, the risk heads, business heads and product heads (and tasked to review among other things stressed accounts) allow an extra $1 billion of them to masquerade as standard assets? The last full year of profit was inflated as much as 44% by that means.

Assets that should have been classed as problem loans

It’s of some consolation that 34% of that $1 billion in problem loans have been recovered or sold since 31 March. But analysts should temper their optimism about the 47% that have been upgraded to standard accounts.

Whether the corporate debtors that have suddenly resumed servicing their loans can sustain their repayments will only be known in 2018. Considering that for three straight years the RBI has only discovered a bigger and bigger pile of dirt every time it lifted the carpet makes one wonder why ebullient brokers —39 buy recommendations on the stock and only 4 sell — are so keen to give Yes the benefit of the doubt. Investors are less enthusiastic: The stock dropped as much as 9.9% in Indian trading on Friday.

Where Yes deserves full marks is for confidence. Managing director Rana Kapoor is willing to let the provision coverage ratio at Yes drop to 43%, from 60%a quarter ago. Evidently, he’s expecting recoveries.

But the lender has exposure to the same nine accounts in steel, power and other troubled industries that got rival Axis Bank Ltd. in trouble with the regulator. Axis, however, has reclassified all of its lingering exposure to those accounts as NPAs, and made allowances so as to keep the provision coverage ratio in the range of 60 to 65%. That does imply higher credit costs and lower current profitability at Axis than at Yes, but also a thicker safety cushion.

So, no, Yes. Take your investors out of the NPA rabbit hole, then crow about your 3.4 million Twitter followers and 7 million Facebook page likes. Not before. Bloomberg Gadfly

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