Money & Banking

We are almost at normalcy and need to further strengthen it: Yes Bank MD and CEO

Surabhi Mumbai | Updated on October 25, 2020

Prashant Kumar, Managing Director and CEO, YES Bank   -  Bloomberg

Concern is now the impact of pandemic on sectors like real estate, hospitality, aviation


Six months after its reconstruction scheme, private sector lender Yes Bank is almost back to normalcy with a strong operating profit, believes its Managing Director and CEO Prashant Kumar.

In an interview with BusinessLine after the bank's second quarter results, Kumar said the lender is targeting disbursements on retail and MSME in a big way along with some working capital loans to corporates. It is targeting 1 lakh customer acquisition per month and the concern for the bank now is the impact of pandemic on certain sectors like real estate, hospitality, aviation. Edited excerpts:

Is Yes Bank finally on the path of profitability? How do you see the year ahead?

Our strategy was to focus on the operating profit as it seemed that there would be a continuous pressure on asset quality because of the pandemic and there would be pressure on the credit cost. This would help take care of the credit cost instead of dipping into the capital. We are moving in that direction. In the second quarter, we have been able to manage well in increasing income and controlling costs. This is exactly the path going forward for us and we will continue to build on it. If you remove the stressed asset corporate book, then the remaining part of the bank is very strong. We would like to further strengthen the operating income and profit.


What kind of measures are you looking at for this?

First, we will look at increasing loans on retail and MSME and also participating in the working capital consortium for some of the good rated corporates. The issue is that we have very good relationships with some of them in terms of transaction banking and cash management but under new RBI guidelines, unless you are a lender, you can’t open current accounts. We have visibility in terms of their cashflows so we don’t mind entering into that kind of lending relationship as we are comfortable on liability and capital side. We will also continue to focus on fee-based business such as trade finance, transaction banking. On the retail and MSME segment, we will continue more disbursements. In the second quarter, we disbursed about Rs 6,500 crore and now we are targeting Rs 10,000 crore in the third quarter, which will lead to fee income and interest income. The focus on cost control will continue and see more results in the next six months. We have registered 21 per cent reduction on the cost side, which we would like to continue and bring the cost to income ratio to below 45 per cent.

When do you see a full recovery?

On the operating profit, we are almost there compared to the second quarter of 2019-20. The issue is only in terms of elevated credit cost. There is an inherent issue with bank and also in terms of pandemic. But we are almost at normalcy and we need to further strengthen it. We definitely won’t go back to the earlier model. Most of the profit was coming from a huge amount of fee, that will not happen. That kind of income was not actual income. Not going to happen, but other part of fee-based income, we are back.

What is the plan going forward on deposit and advances growth?

On the deposit side, the first six months saw a growth of over 28 per cent. But the year end, we would like to achieve almost 50 per cent growth. The bank was at about Rs 1.05 lakh crore as on March 31, 2020 and we would like to end the year at somewhere between Rs 1.6 lakh crore and Rs 1.7 lakh crore.

On customer acquisition, September was a record for us and we have opened 60,000 CASA accounts and in the whole quarter, we opened 1.5 lakh accounts. We are targeting at least 1 lakh customer acquisition every month and will achieve it in the next three to four months.

On advances, instead of targeting a particular growth, my target is more in terms of fresh disbursement. On the corporate side, we would continue to do the de-risking. We would focus on retail and MSME disbursement and on the corporate side, look at a small amount of disbursement for working capital. Corporate to retail is now almost 55:45 and we would like to reverse it, which should happen in the next 18 months.

How much uncertainty does the Covid-19 pandemic and economic slowdown create for the bank?

We have given the numbers in terms of overdue book as on September 30, 2020, which is around Rs 9,000 crore. It is not necessary that everything in the overdue book will slip. Customers are coming back to pay. We are also not ruling out that anything outside the book may also slip. Overdue book has been fully taken care of with the Covid provision.

By the end of the third quarter, there will be no Covid provision but it will be actually implemented as by then the accounts would slip, upgrade or qualify for restructuring. I think by December end, all this will be clear and the provisions will be used for NPAs or restructuring.

What impact will be there of the government’s waiver of interest on interest?

It will not have any impact on the bank as such because the government will pay the amount.

What kind of requests are you getting for restructuring?

We are getting requests but we are also explaining to the customer that taking the facility is very easy but paying as per the restructuring would be very difficult. They need to be very careful. We are also cautious as it has to be under the RBI scheme and it should be viable. By using the RBI scheme, we will not like to postpone the problem. If it is not genuine or viable, we will not go for restructuring. Most of the requests we are getting are from corporate since we have exposure on real estate and hospitality. The requests from MSME and retail are very small.

What is the status of recovery of bad loans? Is the problem of legacy accounts resolved?

In the second quarter, there was almost Rs 900 crore of recovery. Rs 550 crore came from investment and Rs 300 crore came from other loans. There are many other transactions in the pipeline and the current quarter would be better than the previous quarter.

Legacy accounts have been taken care of. The concern is now the impact of pandemic on certain sectors like real estate, hospitality, aviation. These sectors will take at least six months to return to normalcy. Till then the stress will continue.

Are you worried about the bank’s Non Performing Investments?

It is not really an issue as our provision coverage on NPIs is 71 per cent and we are continuously increasing it. We got almost Rs 560 crore from sale of DHFL bonds. We have used the entire money increase the provision on other NPI.

Anything further on the bad bank plan?

It is a work in progress. It requires a contour of the structure, regulatory approval, interest from the investor. We are moving in all these directions, but ultimately it would depend on the approval from the regulator.

Is Yes Bank looking at any further asset monetisation?

We are going ahead with the AMC sale and we are proceeding for regulatory approvals. Apart from that, nothing else. Yes Securities is a strong entity and we would like to build it further.

Published on October 25, 2020

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