Why did shares of YES Bank collapse?

The private sector YES Bank seems to be struggling lately. On Monday, after the results of the fourth quarter of the financial year 2022-23 was released, its share fell by more than three percent. In fact, in the fourth quarter, the bank’s profit decreased by 45% on year-on-year basis. The profit of the bank decreased from Rs 367.46 crore to Rs 202.43 crore. The market had estimated the profit to be in the range of Rs 232-405 crore. However, on quarter on quarter basis, its profit increased by 293 percent compared to the profit of Rs 51.52 crore.

Provisioning increase  killed Yes Bank’s Q4 FY23 profit:

Yes Bank’s profits have fallen in Q4 FY23 on year on year basis due to the increase in provisioning. In the fourth quarter, the bank made a provisioning of Rs 618 crore, which has more than doubled on year on year basis. During the March quarter, the private sector bank’s total income increased from Rs 5,829.22 crore to Rs 7,298.51 crore on yearly basis. This translates to 25% increase in total income. Meanwhile, the net interest income (NII) increased by 15.7% to Rs 2,105 crore. However, the asset quality, or gross non-performing assets (GNPA), remained at 2.17% in the March quarter compared to 2.02% in the previous quarter.

When and how was damage done?

The bank had sold AT1 (Additional Tier 1) bonds under the name of ‘Super Fixed Deposit.’ According to a SEBI report from 2021, most of the investors of this bond were YES Bank’s customers. Yes Bank sold a total of Rs 8,415 crore worth of AT1 bonds. Investors were told that the AT1 bonds were similar to fixed deposits, but in reality, they were much riskier. In March 2020, the private lender’s shares fell sharply due to a series of bad loans and mismanagement decisions, causing massive loss to investors.