Yes Bank’s New CEO Sees Replenishing Deposits as Top Priority
Yes Bank unexpectedly returned to profit last quarter thanks to a write-back on bond payments.
(Bloomberg) -- Yes Bank Ltd., the Indian lender that was rescued in March, wants to replenish its deposit base after losing more than half in the past year, its new chief executive officer said after posting an unexpected return to profit.
“Our No. 1 priority is to get deposits,” CEO Prashant Kumar said in a phone interview Thursday. The lender will focus on adding low-cost, stable retail savings, a departure from its previous practice of depending on cash from companies, he said.
Kumar took the post in March with the challenge of reviving the private-sector lender that has seen capital erode as it contends with bad loans as well as the outflow of deposits.
The bank aims to raise 100 billion rupees to 120 billion rupees ($1.3 billion to $1.6 billion) of equity capital, preferably via a follow-on public issue by mid-July that will last for the next two years, he said.
“There is a large amount of investor interest,” Kumar said, adding that the bank has written to the market regulator to fast-track its plan and has shortlisted six merchant bankers to arrange the deal.
Yes Bank shares surged earlier, after the bank unexpectedly posted net income of 26.3 billion rupees in the three months ended March 31, thanks to a one-time gain from a bond writedown. The bank clawed back the amount it was supposed to pay to holders of its additional Tier 1 bonds after the Reserve Bank of India waived its payment liability on the securities following its bailout.
Excluding the bond gain, it posted a loss of 36.7 billion rupees as provisions rose.
A nationwide lockdown, imposed to contain the coronavirus outbreak, is increasing the risk of defaults across the financial sector. Yes Bank isn’t immune and expects another up to 170 billion rupees of fresh loan slippages if the shutdown extends beyond May, Kumar said.
“Uncertainty is to the fullest extent,” he said. “We can plan only for the known things.”
Shares of Yes Bank climbed as much as 20%, the biggest intraday gain since March 27, and were up 8.2% as of 2:40 p.m. in Mumbai. The stock has lost 83% in the past year.
Yes Bank has been on a stormy ride following the ouster of its founder and former CEO Rana Kapoor in January 2019. A group of eight lenders led by State Bank of India infused 100 billion rupees into the bank in March after the regulator intervened to prevent it from failing. Restrictions on deposit withdrawals, imposed as part of the bailout, were lifted later that month.
“The worst for Yes Bank has been accounted for and the new management is expected to put it on a track of growth,” said Gaurang Shah, vice president at Geojit Financial Services Ltd. “If you are an investor in Yes Bank shares, then you need to stay married to it for the next couple of years to recover your money.”
- Net income compared with a loss of 15.1 billion rupees a year earlier, the Mumbai-based bank said late Wednesday. Analysts expected a loss of 42.2 billion rupees.
- Provisions rose 33% from a year earlier to 48.7 billion rupees, though they were down from 247.7 billion rupees in the previous quarter.
- Gross bad-loan ratio fell to 16.8% from 18.9% at the end of December.
- Capital adequacy ratio stood at 8.5%, below the regulatory minimum of 10.875%. Core equity capital stood at 6.3% versus a regulatory minimum of 8%.
- Deposits totaled 1.05 trillion rupees, down 36% from December and 54% from a year earlier.
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