Rs 15,000-crore FPO: Yes Bank sees enough fire power for 2 years

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Published: July 14, 2020 6:15 AM

The bank’s total advances stood at Rs 1.71 lakh crore and deposits were to the tune of Rs 1.05 lakh crore as on March 31.

Yes Bank has not included any recoveries from its stressed-asset portfolio while working out the future requirement.Yes Bank has not included any recoveries from its stressed-asset portfolio while working out the future requirement.

The proceeds from Yes Bank’s Rs 15,000-crore further public offer (FPO) will not only help shore up its capital ratios but give it enough fire power to fund growth over the next two years. The bank is also considering setting up a professionally-run bad bank in partnership with new equity investors.

“So, this Rs 15,000 crore, the way we have calculated the requirement, it would take our CET (core equity tier-I) ratio from the present 6.3% to almost 13% and it would also take care of our growth requirements for at least next two years,” Yes Bank MD & CEO Prashant Kumar said at the bank’s FPO press conference. In addition to this capital, the bank also has the comfort of almost 250 basis points (bps) of capital seated in its deferred tax assets.

Yes Bank has not included any recoveries from its stressed-asset portfolio while working out the future requirement.

It expects the 13% CET-I ratio to offer a buffer of at least 500 bps over the regulatory minimum requirement and also take care of growth requirements. “Since we have already made provisions for our existing book, we believe that because of Covid we may have to use only on a very, very bad day a maximum of 100 basis points from the current capital for our provisioning requirement,” Kumar added.

Yes Bank is targeting a current account savings account (CASA) ratio of over 40%. It wants its loan mix to change to 60% in favour of retail and small enterprises loans from the current level of 45%. “The lower-rated corporate will continue to get our attention in terms of loan growth,” Kumar said, adding that Yes Bank’s capabilities in retail and MSME lending are well-established and the quality of that book is good. The lender is looking to achieve a return on assets (RoA) of more than 1% over the next three years and more than 1.5% over a five-year period.

The bank’s total advances stood at Rs 1.71 lakh crore and deposits were to the tune of Rs 1.05 lakh crore as on March 31.

Yes Bank is considering a plan to set up a separate bad bank-like structure. “We are exploring this possibility where we can hive off our bad loans into a separate subsidiary where investors who are experts in the area of stressed assets would come in with an equity participation and this will be subject to regulatory approvals,” Kumar said. If the bank gets these approvals, the subsidiary will be managed by professionals and any upside can be shared both by the bank as well as the investor, in proportion to the equity with which they would be participating. The bank has already moved all its stressed assets into a separate vertical; the bank had 34 such assets as on March 31. It is looking at all alternatives to reduce its stressed book, including settlements with borrowers and sell-down of loans to asset reconstruction companies (ARCs).

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