The bank was on a loan spree even amidst mounting bad loans

The government had recently put private sector lender Yes Bank under moratorium till April 3 and capped deposit withdrawal at ₹50,000 after severe deterioration of the bank’s financial position.

However, Yes Bank’s books show that warning bells had been ringing for more than a year. The bank went on a loan spree even as bad loans mounted. Meanwhile, depositers withdrew large amounts, resulting in the bank’s profitability nosediving in the last two fiscals.

Loan spree

In the last five years, Yes Bank went on a loaning spree. Its total advances rose by 334% between FY14 and FY19, the highest rise among comparable banks in the period.

Percentage change of total advances

image/svg+xml Bank FY14 to FY19 (%) Yes Bank 334 HDFC 170 ICICI 73 Axis 115 Kotak 288 SBI 81

Also read: Explained | Why did Yes Bank have to be bailed out?

Bad loans multiply

Many borrowers started defaulting. The bank’s Gross NPA% (loans overdue for >90 days) zoomed to 7.39% as of Sept. ‘19, the highest among comparable banks.

Gross NPA to gross advances ratio

image/svg+xml 12 10 8 6 4 2 0 7.39% 2014 2015 2016 2017 2018 2019 Q2FY20 SBI ICICI Yes Axis Kotak HDFC While in FY14, Yes Bank’s Gross NPA was the lowest, in Sept. ‘19 it was the highest

Also read: Yes Bank founder Rana Kapoor arrested by Enforcement Directorate

Low provisions

While bad loans piled up, Yes Bank did not make enough provisions in its profits. Its Provision Coverage Ratio in FY19 was 43.1%, the lowest among comparable banks. RBI says a PCR of >70% is desirable.

Provision coverage ratio

image/svg+xml Bank PCR (%) Yes Bank 43.1 ICICI 70.6 HDFC 71.36 Axis Bank 77 Kotak 71.9 SBI 78.73

Confidence drop

Amidst the loan mess, customers withdrew large amounts, resulting in the credit-deposit ratio of Yes Bank crossing 100% (it lent more than what it received) in FY18, 19.

Credit-deposit ratio

image/svg+xml 100 90 80 70 106.1% 101.3% 2014 2015 2016 2017 2018 2019 SBI Yes Axis Kotak HDFC ICICI

A credit-deposit ratio of 106% means a bank loaned ₹106 for every ₹100 it received.

Also read: Editorial | Banking on bailouts: On Yes Bank crisis

Poor profitability

The loan spree & high NPA meant poor profitability, gauged by Yes Bank’s sinking Return on Assets (RoA) (RoA = net income/ total assets). Graph shows year-on-year change in RoA.

For instance, Yes Bank's RoA in FY19 was 0.52, in FY18 it was 1.78. Thus the y-o-y change of -1.26 in FY19 is plotted in the graph.

Return on Assets

image/svg+xml 1 0.5 0 -0.5 -1 -1.5 2015 2016 2017 2018 2019 SBI Yes Axis Kotak HDFC ICICI

Yes Bank’s y-o-y change of RoA sinked to -1.26 in FY19, the highest slump among comparable banks.

Investors sensed trouble

Though the bank’s troubles came as a shock to many, investors sensed it early. The bank’s stock price fell steadily in the past year.

Tumbling stocks

image/svg+xml 16.2 400 300 200 100 0 Mar. ‘18 Mar. ‘20 Mar. ‘19 Yes Bank’s closing stock price 367.9

Source: RBI, Annual reports of banks, BSE Sensex

Note: The print version of the graphic incorrectly noted that the profitability graph plotted Return of Assets, while it had actually plotted the y-o-y change of the same.