On a day Yes Bank declared its Q4FY16 results and its market capitalisation hit an all time high, its MD & CEO Rana Kapoor spoke about the secret behind the bank’s sustained growth and his strategy to make the future even brighter. Excerpts:
How did Yes Bank manage to grow its advances by 30% (y-o-y) at a time when the industry as a whole is struggling to hit even double digits?
One should remember that even at the end of two phases of growth — in two modules of five years each — as of March 2015, we had a market share of just 1% even after growing at a CAGR of 35% for 10 years. So, for a bank like that of ours, which is reasonably well preserved in asset quality and is fairly well stocked on capital, this is a very opportune time to get market share and along with that capture mind share. Our strategy is to be a whole country bank and cater to each state and Union territory. Hence, we are sure of having a minimum market share of 2.5% by 2020.
Can you break down the growth in your advances between corporate and retail?
Our corporate book grew by about 27% in FY16, while the consumer retail book grew by 41-42%.
What gives you the confidence to guide for a further 10 to 15 bps improvement in NIMs in FY17?
If you look at the overall composition of our liabilities, our CASA ratio has improved by 500 bps (y-o-y) in FY16 — from 23.1% to 28.1%. SA, in itself, grew by almost 60% in the last one year. We are seeing fantastic growth quarter-on-quarter in our SA balances. Moreover, the bank has a fair amount of stored value because we are giving 6% interest to everyone. We are also seeing very good appreciation in our CA balances because our cash management solutions are getting more penetration. So, we believe that we will achieve our CASA target of 40% far sooner than our original target of March 2020.
Secondly, our priority sector lending book, which till now had a negative carry because of us having to buy securitised portfolios, has more or less reached a stage wherein it is being generated by in-house direct origination at base rate/MCLR linked pricing. Another factor that we believe will help our NIM expansion is the ability of our bank to issue green bonds, in which we are the pioneers in the country, and infrastructure and possibly even affordable housing bonds, which are exempt from GTL, PSL and SLR.
Is it a conscious decision of yours to stay away from any SDR or 5/25 restructuring?
In principle, 5/25 is a good restructuring scheme as long as there is preservation of economic value. So, we won’t be averse to it if there is a good opportunity in the future. As far as SDR is concerned, I don’t think it’s a scheme, at least in the current framework, that makes a lot of sense or offer enough value for a bank to get into.
Though you have highlighted the preservation of asset quality as an achievement, can you please elaborate what you expect going forward?
We have reason to believe that we have fairly good risk management controls. The overall risk architecture of the bank — its management team and product, relationship and risk managers — has demonstrated a great ability to manage asset quality for the last 32 quarters (since the onslaught of the GFC). This — a strong risk and credit culture — is the single most important aspect of Yes Bank. It is a part of our DNA. Hence, we believe, we will overcome all incremental challenges that come our way in the next 6-12 months. I think the worst is over. We believe our credit cost won’t exceed 50 to 70 bps in the forthcoming year.
