Following its success in regaining depositors, Yes Bank Ltd., which was once at the core of India’s largest financial rescue, will concentrate on increasing lending to businesses this year, according to Chief Executive Officer Prashant Kumar.
After regulators seized the lender to prevent it from crashing, Kumar took over the reins of Yes Bank in March 2020. His first order of business was to reclaim depositors and raise money. After a year, its deposits have increased by nearly 55 %, compared to a loss of 40 % prior to the bailout.
In an interview with Bloomberg News on Saturday, Kumar said, “We have achieved our goal for derisking our corporate book.” “This year, we’ll concentrate on getting back in front of the lending curve and speeding up our bad loan recoveries.”
After a history of lending to weak companies under former co-founder and ousted CEO Rana Kapoor, Yes had reduced its exposure to businesses to derisk its balance sheet. The bank’s demise was precipitated by a pile of bad loans, low capital ratios, and a flight of depositors, resulting in its seizure and transfer of ownership to a group of State Bank owned leaders.
Kumar said the bank would target to increase its corporate loan book by 10% this year, compared to an 11.7 % contraction the previous year. He also mentioned that the focus would be on increasing retail and small business lending by 20%. Yes Bank has a much better capital position, with a capital adequacy ratio of 17.5 % as of March 2021. Kumar claims he now has a better understanding of the bank and can therefore provide an outlook, something he was unable to do last year when he was brought in to save the private lender.
Even as operation curbs to stem a second coronavirus wave in India, add to the economy’s pain and threaten to drive up banks’ bad loans in the future, Kumar is optimistic of recovering at least 50 billion rupees of soured debt in the current financial year.
“It was a complete lockdown in 2020,” Kumar said. “The economy is doing much better now. We still have vaccines this time. We have a positive outlook.”
The bank lost 37.9 billion rupees ($512 million) in the March quarter, as it increased its bad loan buffers. As of the end of March, its gross bad loan ratio was 15.4 %, down from 20 % three months earlier.
Kumar believes the worst is over and that the bank will not need to substantially increase its provisions, which have been a major drag on profitability so far. Yes Bank expects slippages of less than 50 billion rupees, the majority of which will come from its 137 billion rupee stressed book, according to him.
The lender has been given permission to raise up to 100 billion rupees in money, but it does not need to do so this year unless a large lending opportunity arises. Last July, it raised $2 billion. “Life is full of challenges, particularly when you’re running a bank that was on the verge of failing just a year ago,” Kumar said. “This journey will undoubtedly be difficult.”
