Yes Bank on Thursday reported a 26.5% growth in net profit for the quarter ended September 2015. Rana Kapoor, MD & CEO, told reporters that the lender expects to contain its credit cost in the guided range of 50-70 bps for the fiscal year. Kapoor added that the bank sees an opportunity for a bond issue of $300-500 million for funding its IFSC Banking Unit operations in GIFT city.
What has led to the rise in NPAs?
Because the overall base of gross and net NPAs in the bank has been fairly low, naturally it seems like a big jump. In reality, when you look at the absolute number, it is only R52 crore net NPAs. It is a reflection of the credit environment. Our credit cost guidance is at 50-70 basis points for this fiscal year.
This quarter, our credit cost is only 54 bps — well within the range. We expect that for the rest of this year, we will contain our credit cost in the guidance range of 50 to 70 basis points. The net slippage sequentially is only R51.9 crore and this is basically the manufacturing sector. It is not significant enough for me to mention any names.
What about your gross slippages?
We have recoveries of around R14-15 crore and no write-offs, so naturally that number (gross slippages) will be more like about Rs 70 crore.
You were looking to raise around Rs 700-800 crore through bonds. Will that fund raising happen any time soon?
We are actually waiting for the yields to come off. We should see at least a minimum tranche of Rs 500 crore in this quarter.
What about your offshore fund raising since you have commenced your operations in the GIFT City?
We do believe that there is an opportunity for a bank like ours to do a bond issue of minimum $300 million to possibly even $500 million.
We already have a Moody’s rating, which is the same as the sovereign rating at ‘Baa3’. As is required, we are getting a second rating from S&P. So, once we have two ratings and identify borrowers, we will go to the market. It could happen in the next couple of months.
Your cost-to-income ratio has risen slightly y-o-y…
It is well within our target of between 40% and 42%. We were at 43.7% in the June quarter. We have ended the September quarter at 41%. We are investing in more branches, we are investing in our digital network and in our back-office network. While we are in investment mode, we believe it would range between 40% and 42%.
In the medium to long term, when we start getting good revenue to employee ratios overall for the retail businesses, it will create further improvements in cost to income ratio. I have reasons to believe that in the next three to five years, the cost to income ratio could come to levels of around 37-38%.
You have not sold any assets to ARCs. What is the reason?
Banks should have in-house expertise. We have a unit called ARMY, which stands for ‘Asset reconstruction management by Yes Bankers’. We believe that the strength of a bank in the medium to long term will be proven by having this ARC expertise in-house. So, practically we want to solve our own problems and not outsource our problems to other ARCs. This is a long-term strategic decision of the bank and, therefore, no sale for the last four quarters.