The mid-sized lender’s expansion plan comes after it raised $1.1 billion last week by selling up to a 10% stake Carlyle Group And Arrival International,
The fundraising marked a rare vote of confidence in Yes Bank, which had to be taken by the central bank in March 2020 following allegations of deterioration and mismanagement of its financials.
The bank also managed to raise capital for the first time since July 2020, at a time when the outlook for the banking sector in several overseas markets has been muted due to slow economic growth, which is expected to impact asset quality and credit demand. Is. CEO Prashant Kumar said it wants to grow its loan book by 15% in the financial year ending March 2023 as it shifts its focus to mortgage, vehicle loans and small and medium-sized business loans.
After contracting over the past two years, its loan book expanded by 8% in the last financial year, slightly less than the 9.6% growth posted by the Indian banking sector.
“We are certainly growing more than the (debt book) industry, but we wouldn’t want to make any mistake,” Kumar told Reuters.
The bank may also look at acquisitions by tapping the newly raised capital.
Kumar, who took over in March 2020, said, “We can also explore opportunities in microfinance, as this is an area where we are not present yet and it will take time to build it internally, so there is an opportunity to achieve this.” Could make sense.”
He said the capital raised will improve the bank’s common equity tier-1 capital ratio, a key gauge of financial strength, from 11.9% currently to 15.7%, and will give the bank at least three to four years to raise more capital, he added. will not be required. ,
long road ahead
Founded in 2004, Yes Bank was the country’s fifth-largest lender until early 2020, after which it went from one crisis to another, including the arrest of its founder amid allegations of governance defaults.
Its gross bad loans as a percentage of total borrowings rose to 18.87% as of December 2019, from 2.1% a year ago. The ratio stood at 13.9% at the end of June 2022.
Other state-owned banks and private lenders had to step in in 2020 to save the bank.
After falling 23% last year and 62% in 2020, Yes Bank stock has gained over 22% so far this year.
Despite modest improvement in its financial position over the past few quarters, some analysts said it would take several years for the bank to show meaningful growth and stabilization of its key financial ratios.
In FY 2022, the bank reported a profit of 10.66 billion Indian rupees ($134 million) compared to a loss of Rs 34.62 billion in the previous year. Kumar is confident that its stable capital position will improve the bank’s rating, which in turn will bring in more business and aid in profitability.
However, analysts and investors are skeptical.
“Even if the Yes Bank turnaround works, it will take at least six to seven years,” said a fund manager. Media.
“I don’t think the latest developments will excite investors.”