Yes Bank: Imagine a nation without a secure and efficient banking system. Businesses wouldn’t be able to access capital for growth, individuals would struggle to manage their finances and the overall economy would grind to halt. Banks are the lifeblood of any economy. They act as intermediaries, collecting savings from individuals and businesses, then channelling those funds into productive investments. 

Yes bank, once a prominent player in the Indian private banking sector, has had a tumultuous journey. Once they were called as the 5th largest private sector bank in India, but now because of their downfall most of the people have lost their confidence about Yes bank. What went wrong with Yes bank? Will it come back to its normal position in this competitive world?

Let’s delve into the concept and learn more.

Company outlook Of Yes Bank

Yes Bank was established as a private sector bank in 2005 by Ashok kapur and Rana kapoor. It has its headquarters in Mumbai, Maharashtra. It plays a crucial role in providing full service commercial banking which involves catering to retail, MSME (micro, small and medium enterprise) and corporate clients.

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Yes Bank boasts a pan – India network of over 1,198 branches, with 193 banking correspondent branches ( BCBOs )and more than 1,287 ATMs across 300 districts. It also has an International banking unit and a representative office abroad. 

The bank prioritizes digital banking, offering a robust online platform and mobile app for seamless banking experiences. Yes Securities, a wholly owned subsidiary, handles the bank’s brokerage business. The bank has achieved a credit card base of 2 million, issuing over 50,000 cards annually in recent years. 

What went wrong with Yes bank?

Yes bank started its journey in 1999, with three successful bankers joining hand to form an NBFC (Non banking financial corporation). They include Ashok kapur, Harkirat singh and Rana kapoor. Yes bank received banking licence from RBI in 2003. 

Harkirat singh the former country head of Deutsche bank quit yes bank in the same year for conflict over the vision of Yes bank. After that Ashok Kapur became the Chairman and Rana kapoor became the MD and CEO of yes bank, during the initial years Yes bank has undergone slow and steady progress.

The turmoil started in 2008 after Ashok kapur died in the Mumbai terrorist attack. After that Rana kapoor took incharge of Yes bank, being an ambitious man Rana kapoor wanted to make Yes bank the number 1 private bank in India.

Yes bank started aggressive lending to grow quickly. Yes bank gave loans to corporates to whom other banks denied to give, because of this yes bank started adding bad loans on their books. 

In 2015, UBS published a report stating Yes bank has lent around 125% of its net worth to stressed companies. After hearing this, the RBI  started an asset quality review on Yes bank books and they found that yes bank’s loan books include Anil Ambani’s Reliance, the Essel Group (Zee), IL&FS, Jet Airways, Cox & Kings and Vodafone which were all under stress.

In 2017 RBI also found that Yes bank’s NPA were closer to rupees 8,000 crores but the bank declared it had only NPA’s worth rupees 2000 crores. Yes bank’s share price started falling eventually by 57% from its all time high of 404 from August, 2018 in the next four months. 

Then RBI asked Rana Kapoor to step down from MD and CEO position from Yes bank within January 2019. RBI in its report also stated that several lapses and regulatory breaches were taking place in the bank’s functioning and the bank was deliberately attempting to mislead its disclosure. 

Yes Bank appointed Ravneet Singh Gill as new MD and CEO on 1st March 2019. Bank reported a loss of rupees 1507 crore in Q4 of FY 2019. At the same time Macquarie, an Australian global financial service group, double  downgraded Yes bank and as result stock price continued to decline even more. 

Yes Bank posted rupees 16,418.02 crore net loss in FY 2020, with a total bad loan worth rupees 50,000 crores. By seeing this, the RBI decided to put Yes bank under moratorium and the depositors were not allowed to withdraw more than 50,000 rupees. RBI also asked SBI to form a consortium of banks to invest in Yes bank.

Even the existing shareholders were not allowed to sell 75% of their shareholdings over the next three years. Then SBI along with LIC and other banks added 11,000 crore rupees into Yes bank. On 6th of October 2022, Prashanth kumar was appointed as CEO and MD of Yes bank.

Raise and Financial outlook of Yes bank

After the appointment of Prashanth kumar as CEO and MD, Yes bank started to rebuild its trust and started to grow its business. On 19th of December 2022 Yes bank sold rupees 48000 crore bad loans for 11,500 crores. They said that it has signed an agreement with JC flowers as a partner for sale of rupees 48,000 crore worth stressed loans.

In July, 2022 it raised funds worth 8,900 crore rupees from Carlyle and Advent, the global private equity firms. Prashanth kumar also said Yes bank would use rupees 9,000 crore for meeting their growth requirements for medium to long term.During the Q1 FY 2023 Yes bank reported a net interest income of rupees 1,850 crore which rose by 32% on YoY, and the Net profit rose by 50% to rupees 311 crore.

After the sale of stressed loans the company’s Net NPA has improved to 0.8% in 2023 compared to that of 4.5% in 2022. Yes Bank also improved their combined value of Net NPA and Net carrying value of security receipts to 2.4% in 2023 as opposed to 4.8% in 2022 and 6.8% in 2021.  

FY 2023FY 2022FY 2021FY 2020
Net Interest income7,902.406,490.337,428.356,793.96
Net profit (in crores)735.821064.05-3488.93-16432
ROE1.54%2.74%00
ROA0.20%0.40%-1.40%5.39%

In FY 2023 Net interest income of the firm increased by 21.75% from 6,490.33 in FY 2022 to 7902.4 in FY 2023. This increase happened because of an increase in current account and savings account deposits.

Analysing a span of three years, encompassing FY 2021 to FY 2023, the company displayed a Compounded annual growth rate (CAGR) of 1% in revenue.In FY 23, Yes bank maintained a Return on Equity (ROE) of 1.54%. The reduction of ROE took place because of an increase in operating expanses compared to that of the net interest income . 

In FY 2022-23, YES BANK’s retail advances climbed to 45%, up from 24% in FY 2019-20. CASA + Retail Term Deposits accounted for approximately 59% of Total deposits. The bank excelled in deposits and retail asset products, while also offering personalized banking solutions.

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Future Plans Of Yes Bank

Yes bank has aimed to open 150 branches IN FY 24 and they have opened around 110 branches as of now. The bank is also planning to expand its branch in FY 25. Prashanth kumar the CEO of yes bank told that yes pay is getting good feedback and they are planning to develop a mobile banking app for business by FY 25. 

He said they have warrant conversions due next quarter, this would contribute upto 250 basis points to the capital. He has also mentioned the firm has sufficient capital to take care of FY 25. With its increase in capital and strong asset quality the bank looks promising to capture its market share back in the upcoming years.

Conclusion

Yes bank’s future remains unwritten, but recent developments offer a glimpse of hope. Their past struggle, marked by raising bad loans and governance concerns, significantly eroded investor confidence. However, the bank has embarked on a crucial restructuring effort. Yes bank’s recent quarterly results showed a positive uptick in revenue, indicating a potential shift in their financial trajectory.

The future success of Yes bank will depend on their ability to navigate the fiercely competitive Indian banking landscape. Will Yes bank continue to grow like the past year, or will it struggle again? Do share your thoughts in the comments below

Written by Pavunkumar V M

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