Yes Bank

COVID-19 has led to a delay in recovery – Yes Bank

On Tuesday, Nifty ended 0.3%, lower than the previous close at 11,317. The top gainers for Nifty 50 were BPCL (+2.8%), HCL Tech (+2.0%), and Infy (+1.4%) while the losing stocks were Infratel (-8.1%), ZEEL (-4.7%), and Tata Motors (-4.5%). The only sector in green was IT (+1.2%). The top losing sectors for the day were Media (-3.0%), Realty (-1.7%), Pharma (-1.6%) & PSU Bank (-1.6%).

Edited excerpts of an interview with Mr Prashant Kumar, MD & CEO, Yes Bank Ltd; dated 07th September 2020 from CNBC TV 18:

The recovery target would be for the entire stressed book; it is an issue about the timing. Due to COVID, the targets which the bank was expecting during FY21E have slowed down a bit. But he thinks that the bank is absolutely on track and during the current year and going forward he is confident that they will be able to recover.
Yes bank has seen a 22% cost reduction in 1QFY21. Yes Bank is targeting cost reduction of at least 10% year-on-year (YoY), but because of COVID, everything is not working in the way it used to work in the past. So, he thinks that is helping them to reduce costs further. They are working on the current situation. The Bank has launched a programme which allows a sizeable portion of the workforce to work from home which will be convenient for the younger generation & women associated with the bank.
Yes Bank already has provision coverage of almost 76% on their loan book. This loan book with 76% coverage where the estimates of loss given default (LGD) is something around 60-65%. So, that kind of loan assets can very easily move to SPV.
Talking about Dish TV stake of 24% with Yes Bank, Mr Kumar said that every case has its own merits and reasons for taking a specific course of action. In the case of Dish TV, they are evaluating the different options. He further added that there are a number of suitors for Dish TV and that they are looking for the best deal.
Deposits have seen 11% QoQ growth in 1QFY21. Going forward, he sees good progress on deposit front. There is deposit accretion seen. As of March 2020, the corporate & retail contribute is 50:50. The bank is also able to protect their margins accordingly.
Loan Book recoveries rate elongated due to COVID situation.
Yes bank looking for three partners on life as well as non- life.

Consensus Estimate: (Source: market screener website &
The closing price of Yes Bank Ltd was ₹ 14/- as of 08-September-2020. It traded at 0.8x/0.5x/1.0x the consensus book value estimates of ₹ 17.0/29.0/13.5 for FY21E/FY22E/23E respectively.
The consensus target price of ₹ 28/- implies a PE multiple of 2.1x on FY23E EPS of ₹ 13.5/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Existing book has been taken care of – Yes Bank

Update on the Indian Equity Market:

On Thursday Nifty closed +1.2% higher at 10.740. Among the sectoral indices, IT (+2.8%), Pharma (+1.7%), and Auto (+1.2%) closed higher. Media (-1.7%) was the only sector to close lower. Infosys (+9.5%), BPCL (+6.9%), and CIPLA (+5.6%) closed on a positive note. Bharti Infratel (-7.0%), TechM (-2.7%), and ITC (-2.4%) were among the top losers.

Excerpts from an interview of Mr Prashant Kumar, CEO, Yes Bank with ET dated 14th July2020:

  • His view on the current capital raise: the current CET (common equity Tier 1) is 6.3% and this capital raise will take it to 13% giving a buffer of 500 basis points over the regulatory requirement.
  • This will also take care of the growth requirements for at least two years. Even after two years of growth CET would be around 12% to 13%.
  • On usage of funds: the existing book has already been taken care of and the provision on account of future slippage will be taken care of by the pre-provisioning operating profit. So, this capital will not be used for any provisioning. In the worst-case scenario 100 basis points of capital may be used for provisions mainly due to Covid19.
  • On the loan book post Covid-19: three sectors which have been impacted by coronavirus are hospitality, aviation and real estate. The bank is not seeing any recovery in these three sectors. Except these sectors, recovery is happening. Second, all term loans have been extended by 6 months.
  • He expects things in these sectors to normalize within 2-3 months. The impact on book could be around Rs 10,000 crore, which could be at risk out of total book of Rs 1.71 lakh crore as of March 2020.
  • On the liability side: there has been a net addition in deposits and in the last two months the bank has been able to reduce 100 basis points on saving bank rate and 50 basis points on term deposits, which is a good thing.
  • The targeted CASA ratio is 40% in next three years from 27% in march20.
  • On corporate lending: the bank will not do incremental lending on the corporate side at least during the current financial year, and repayments would reduce the corporate loan book. The bank expects corporate book to come down to 50% from 55% now and further to 40% in FY22.
  • On Return on Assets (RoA) front: RoA is expected to be at 1% by 2023 through improved margins and also lower costs from our branch network, outsourced employees, vendor contracts, lease rentals.
  • He says, rural and semi urban branches will be converted into business correspondent model and some 30 to 35 branches will be merged.
  • On the retail side, the existing book is largely secured. Going forward, the bank will look at secured loans to salaried customers, equipment finance, vehicle finance, gold loans, two-wheeler finance. On MSME, the bank is present in the entire ecosystem of dealer financing but most of it is secured by collateral.
  • Now the challenge is to generate profits. Deposit part has been taken care and the bank is moving towards profit direction. Once capital is there, it would be only to look at growth without having NPAs. The bank’s pre-provisioning profit is improving and when provisioning requirements lessen, there will be a net profit.
  • On technology front, investments have been made. Even today the bank has 40% market share on UPI.

Consensus Estimate: (Source: market screener and websites)

  • The closing price of Yes bank was ₹ 19/- as of 16-July-2020.  It traded at 1.5x/ 0.5x the consensus Book value estimate of ₹ 12/32 for FY21E/ FY22E respectively.
  • The consensus average target price for Yes Bank is ₹ 30/- which implies a PB multiple of 0.9x on FY22E BV of ₹32/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”




Yes Bank’s priority is to create a greater degree of comfort for depositors, clients, regulators

Update on the Indian Equity Market:

On Wednesday, Sensex gained 175 pts and Nifty ended at 12,043. The market was volatile due to mixed global and domestic cues. There was positive news flow on the trade tariff front from the US.

Among the sectors, except Infrastructure and Reality, all other sectors closed in the green. Among stocks, Tata Motors closed with gains of 7%, followed by metals stocks such as Tata Steel, and Hindalco which closed with gains of over 2 % each.

Yes Bank’s priority is to create a greater degree of comfort for depositors, clients, regulators

 Key takeaways from the interview of Mr Ravneet Gill, Chief Executive Officer, Yes Bank; dated 3rd December 2019:

·        When asked about raising the target of capital raising from USD $1.2 bn to 2 bn Mr Gill said that the opportunities for private sector Banks have become much broader and would like to monetize this big opportunity that lies ahead of them. He also stated that it was important for them to convey the message to the stakeholders that Bank is on a stronger and more stable footing.

·        According to Mr Gill, more capital is better than less, and quicker than later. The first priority for the bank should be to be able to create a very high degree of comfort, whether it is depositors, clients or regulators.

·        When asked about the valuation, he shared that the fundamental reason why Yes Bank is trading below book value is that there is a belief that the bank is not fully capitalized. He thinks the fundamental fix to this problem is capital.

·        According to him, once the capital comes in the bank, we will be able to see  that the bank will start to trade at a better multiple.

·        When asked about expecting any dispensation from SEBI on pricing formula, he replied that he won’t be asking for it as he doesn’t think there is a need to do so. The investors who have come in understand that they will need to come in at whatever is the pricing formula and the guidelines around pricing and he thinks they are happy to go with it.

·        He said that the final allotment will be done in the board meeting to be held on 10Th December 2019.

·        He mentioned that they are in discussions with the investors about creating a framework, creating a roadmap, which will facilitate the application to the RBI and for the RBI to take a view. He also clarified that he would not like to prejudge RBI’s views and they haven’t had a conversation with RBI yet.

Consensus Estimate (Source: market screener website)

  • The closing price of Yes Bank was ₹ 63/- as of 04-December-19. The Consensus estimate for Book Value of Yes Bank is not available. 

Yes Bank: $2 billion funding to be key driver when improving economy creates opportunities

Update on the Indian Equity Market:

Following the weak macro data released on Friday, the markets started the week on a negative note with Nifty falling 7.8 points to close at 12,048. Among the sectoral indices, all but one index, METALS (0.3%) traded higher whereas IT (-0.9%), AUTO (-0.9%) and PSU BANK (-0.9%) led the decline. Within the index stocks, BHARTIARITL (4.1%), JSWSTEEL (2.5%) and RELIANCE (2.3%) topped the chart whereas YESBANK (-6.6%), EICHERMOT (-5.2%) and INFRATEL (-3.2%) took the index lower.

Yes Bank:  $2 billion funding to be a key driver when improving economy creates opportunities

Yes Bank on Friday informed exchanges about raising $ 2 billion by selling new shares to a clutch of institutional investors and wealth managers. Key takeaways from the interview of Mr Ravneet Gill, MD & CEO, Yes Bank  dated 2nd December 2019 published in CNBC TV18:

·        On being asked why the bank is raising $ 2 bn instead of an earlier target of $ 1.2 bn, Mr Gill mentioned that given the increase in the authorised share capital which was approved in the board meeting of August, at the current market price, enables the bank to raise a lot more capital.

·        The market is worried about whether the Reserve Bank of India (RBI) will approve the names of investors. He said that the capital raising is taking place on a preferential allotment basis. There are strict guidelines in terms of qualification of investors.

·        According to the norms, any fund that has sold the Yes bank stock in the last six months is not allowed to participate. The one year lock-in period of the offer makes the domestic mutual fund ineligible. As a result, the bank had to work with limited planned universe. According to him, two things were important before finalizing names of investors; size and partners who were in alignment with the strategy of the banks and who could remain long-term partners for the bank.

·        About the investment offer made by Erwin Singh Braich for $1.2 bn, he said that the bank has done enough due diligence about this transaction. The big question is about whether the investor has the wherewithal to be able to bring in investment of that size. According to him, the investor will be able to satisfy the market on that very shortly.

·        He mentioned that although this is a binding offer, there is no bank guarantee attached to it. But the investors have gone to great length to show their resources of funding and whether they can meet the requirement or not.

·        About the voting rights post-dilution; he said that the investors have no desire for controlling the operations of the bank. The investors have invested based on the thesis that they see private banks in India as a very strong investment opportunity. As a result, even if the voting rights of these investors are curtailed by the RBI, it would not matter much to the investors.

·        The investors have asked for board representation. He defended this demand of investors by saying, “if you are making an investment of that size, then board representation makes sense.” He also added that they are not looking for management rights or control functions.

·        The bank has also received interest from the family office of Citax holdings Ltd. & Citax holding group for an investment of $500 mn. This will need the approval of RBI given the fact that the investment is for above 5% stake. The bank plans to take these bids to the regulator for approval.

·        He agreed that the current investments are done on below book value which is not a good idea for the existing shareholder. But the very reason why the bank is trading at a discount is that the market’s view is that it needs more capital. And the moment that capital comes, the market will see the pickup in valuations as well.

·        On the growth opportunities for the bank, he said that the country has hit the bottom in terms of economic macros and from hereon, there will be a pickup. This will create a lot of opportunities for the bank. The dislocation in the whole NBFC space and public sector banks expanded the addressable market for the bank. With the capital that is coming, the bank could grow at a very robust pace.

Consensus Estimate (Source: market screener website)

  • The closing price of Yes Bank was ₹ 64/- as of 02-December-19. The Consensus estimate for Book Value of Yes Bank is not available. 

Ravneet Gill, MD&CEO, Yes Bank: Wants Yes Bank to retain its corporate character.

Dated: 20th August 2019

Excerpts from an interview published in The Hindu Business line dated 19th August 2019.

  • On the recent QIP: The Yes Bank QIP was oversubscribed over 3 times. This when two other IPOs in the market were undersubscribed.  Yes Bank could raise Rs 1,930 cr as the shareholders’ approval was limited to a dilution of 10%. The QIP impacted the CET-1 ratio positively by 60 bps (8.6% vs. 8.0% prior to QIP). Management plans to add another 20-25 bps through balance sheet rationalization. This will be done by reducing the corporate book.
  • Historically Yes Bank has been a strong structured finance bank.  Eventually, management wants to free up capital to grow on the retail side. Management plans to change the mix of corporate to retail in terms of revenue from the current 67:33 to 50:50 by 2025. But management wants Yes Bank to retain its corporate look, feel and character and not become a retail bank.
  • The stressed asset book is not very granular. There are a handful of entities that are facing illiquidity. If those are resolved, the complexion of the book would be completely different.
  • The sub-investment book (BB and below assets) currently stands at Rs 29,000 cr. Three names account for nearly 80% of the book. 2 out of these 3 that account for around Rs 9,000 cr should be fully resolved in the current quarter. This will release capital for the bank and risk perception around Yes Bank will moderate.
  • There is no other bank as digitally enabled as Yes Bank. The market does not recognize that yet.
  • Best way to lower Risk-weighted assets (RWA) is to try and lend to high-rated corporates. For that, cost of funding needs to be competitive which can be achieved by strengthening of the liability profile.

Share price performance of Yes Bank on 20th August 2019:

Yes bank share price declined by over 7% on Tuesday. Yes Bank holds 12.79% stake in CG Power and Industrial Solutions Ltd. The risk and audit committee of CG Power disclosed Corporate Governance issues in the Company. The issues include but are not limited to the understatement of liabilities, understatement of advances to related and unrelated parties, provision of certain assets of the company as collateral without due authority. These actions were allegedly carried out by identified company personnel (both current and past). Shares of CG Power tanked 20% on Tuesday.

Consensus estimates (Source: Marketscreener website):

  • The share price on 20-08-2019 was Rs 71/- per share. It was trading at a P/B of 0.60x/0.55x its book value per share estimates of Rs 118/127 for FY20E/FY21E respectively.
  • The consensus price target is at Rs 117/- implying P/B of 0.92x for FY21E BVPS of Rs 127.

Yes Bank 1QFY20 result highlights: Return to Profitability, Asset Quality worsens.

Dated: 18th July 2019

• Yes Bank reported a 10% YoY growth in Advances. Advances declined by 2% sequentially over 4QFY19. Share of retail advances increased to 18% in 1QFY20 from 14% in 1QFY19.
• NII was reported at Rs 22,809 mn, 3% higher YoY and 9% lower QoQ. NII was lower by Rs 2,230 mn on account of interest reversals on slippages.
• Pre-provision operating profits were 20% lower YoY but improved by 48% QoQ. The sequential improvement was due to lower operating cost-to-income ratio and Rs 6,561 mn of treasury gains. 
• Yes Bank made provisions of Rs 17,841 mn in 1QFY19. Provisions included Rs 11,100 mn of MTM provisions on investments due to ratings downgrade. 
• Yes Bank returned to profitability with Net Profit of Rs 1,138 after a loss of 15,066 mn in 4QFY19. 
• Asset Quality worsened sequentially to GNPAs and NNPAs of 5.01% and 2.91% respectively in 1QFY19 from 3.22% and 1.86% respectively in 4QFY19. The share of sub-investment (BB and below) grade book in total advances increased to 9.4% from 7.1% in 4QFY19 due to exposure to 2 large financial players.

Conference Call highlights:
• Management expects to raise capital in 2QFY20. 
• Management maintained their Credit Cost guidance for FY20 at 125 bps. This is excluding MTM provisions on investments that may be required. 
• Yes Bank’s CET1 (Common Equity Tier 1) ratio has depleted to 8.0% by the end of 1QFY19 from 8.5% in the previous quarter. The CET1 ratio of 8% is the minimum regulatory requirement to be maintained by 31st March 2020. 
• Management said the sub-investment grade book has bottomed out and they expect material reductions in the book due to resolutions.
• According to the management, this was a quarter of consolidation and they expect to regain momentum from this point.