Troubled lender Yes Bank reports wider-than-expected loss

 Troubled Indian lender Yes Bank reported a wider-than-expected quarterly loss of 185.6 billion rupees ($ 2.5 billion), and said it was continuing to analyse the allegations of wrongdoing by former Managing Director Rana Kapoor.

The loss, as reported in a filing late on Saturday, was significantly wider than the 5.7 billion rupees loss expected by analysts, according to Refinitv data. For the quarter a year ago, it had turned in a profit of 10.02 billion rupees.

The lender also indicated it would completely write down bonds worth around 84 billion rupees as part of a state-led restructuring plan, which involves the State Bank of India picking up a 49% stake in Yes Bank.

India last week approved a rescue plan for Yes Bank, once considered a rising star after it was set up in 2004 but now struggling with bad loans. Earlier, the Reserve Bank of India placed it under a moratorium, restricting deposit withdrawals and superseded its board.

Authorities have also opened investigations into Yes Bank’s lending practices that led to its failure, while its founder Kapoor was detained and a case of money laundering registered against him.

The lender said its asset quality took a severe beating in the third quarter, with gross bad loans as a percentage of total rising to 18.87% as of December-end, from 2.1% a year earlier.

Provisions also jumped to 247.66 billion rupees, from 5.5 billion rupees a year ago. The bank said its deposits had dropped by 26% to 1657.55 billion rupees, while advances were down 24% at 1860.99 billion rupees.

The capital adequacy ratio of the bank stood at 4.1% for the quarter, while its Core Equity Tier 1 ratio (CET1) was 0.6% – much lower than the regulatory requirements of 7.375%.

In February, the bank said it would delay its third-quarter results by at least a month as it focused on raising capital.

BOND WRITEDOWN

In its filing, Yes Bank said it will completely writedown 84 billion rupees worth of Additional Tier 1 (AT1) notes.

AT1 securities are a type of contingent convertible bond (CoCo) – perpetual instruments designed after the financial crisis to try to ensure investors, rather than taxpayers, would be on the hook if a bank runs into financial difficulties.

The administrator of Yes Bank had previously said it was in discussion with some bondholders, amid signals that a complete write-off would not happen.