Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

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, found nonperforming assets to have been four times as large on March 31 than was then acknowledged in audited results?

Caught Again
The Reserve Bank of India found Yes Bank's nonperforming assets were four times as large in March as what the lender reported; the divergence keeps growing
Source: Company reports, Bernstein

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 percent by that means.

It's of some consolation that 34 percent of that $1 billion in problem loans have been recovered or sold since March 31. But analysts should temper their optimism about the 47 percent 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 percent in Indian trading Friday.

Problem Solved, Yes?
The upgraded portion of the extra NPA Yes was forced to reveal by the RBI is worth watching
Source: Company reports

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 percent, from 60 percent a quarter ago. Evidently, he's expecting recoveries.

The lender hasn't disclosed if it has exposure to any of the nine accounts in steel, power and other troubled industries that got rival Axis Bank Ltd. in trouble with the regulator. (Yes said on a conference call with analysts it wasn't owed money by Jindal Steel & Power Ltd., reported by the media to be one of those nine accounts.) 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 percent. 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. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects reference to accounts in ninth paragraph to reflect Yes Bank information.)

  1. The remaining 19 percent have been acknowledged now, in the September results released on Thursday evening, as NPAs. 

To contact the author of this story:
Andy Mukherjee in Hong Kong at

To contact the editor responsible for this story:
Paul Sillitoe at