Ravneet Gill, CEO of Yes Bank, said the bank was absolutely liquid and that the recent share price movement should not be looked upon as a proxy of the bank’s health.
Shares of Yes Bank rose 33% on Thursday, following the analyst call in the morning where the bank’s management conveyed that there was no pressure on the bank to merge, as regulators and the finance ministry officials wanted it to be a strong and independent financial institution. Ravneet Gill, CEO of Yes Bank, said the bank was absolutely liquid and that the recent share price movement should not be looked upon as a proxy of the bank’s health. He added that the bank was in talks with strategic and private equity investors for capital infusion.
Since June, Yes Bank’s shares have come under pressure as there was an overhang of one promoter group having pledged its stake. Shares tanked 22.8% on October 1 as lenders invoked the last lot of shares pledged. For the last several months, pledged shares were an overhang on the stock as it also crimped the ability of the management to raise more capital. However, another promoter group’s stake remains pledged.
The bank does not see it as an issue. Addressing analysts, the management of Yes Bank said even though the stock price decline did affect the bank’s plan to raise equity capital, there were provisions available that could enable them to do a preferential allotment at the current market price without following the Sebi formula (average price of six months or last two weeks, whichever is higher), if they made an allotment to a limited number of QIBs (qualified institutional buyers). Analysts, however, believe that the fall in the stock price could pose a challenge to the capital raising plan.
On the asset quality front, the management said that asset quality was holding up despite the deterioration in the macro environment. There is no incremental stress other than what was indicated in the first quarter. The bank is also confident of recoveries as it had reviewed the securities.
Analysts also expressed concern on deposits declining by 7% sequentially in the second quarter of FY20. The bank said that deposits had declined as had assets and, hence, the need for deposits was lower. The bank denied that there was any large scale withdrawals and that the bank was trying to make the bank’s balancesheet more granular and, hence, was not renewing some wholesale deposits. The contraction in the balance-sheet had given the bank an opportunity to focus on retail side, adding that the CASA ratio had improved 60 basis points to 30.8% in Q2FY20. The bank has shrunk its wholesale book in the first two quarters of the current fiscal and that transaction banking was on the uptick as was the government banking business.