MD sure YES Bank to bounce back
Eurozone inflation slows further
Inflation in the eurozone slowed to 1.0 percent in July, official data showed Monday, sliding further away from the European Central Bank's target of just below 2.0 percent.
Revised figures from the Eurostat agency showed prices across the 19-nation single currency area showed inflation falling from 1.3 percent in June and from 2.2 percent a year earlier.
ECB chief Mario Draghi last month signalled that new stimulus measures could be on the cards to try to shore up stubbornly low inflation, as the skies darken with growing fears over US protectionism, weakness in emerging markets and Brexit.
Observers are anticipating a "big bang" from the ECB in September with a possible rate cut as well as other measures.
Ravneet Gill, YES Bank MD & CEO, wants his bank to retain its corporate look, feel and character. He doesn't want it to become a retail bank. In an interview to BusinessLine, Gill emphasised that the success of his bank's 1,930-crore qualified institutions placement (QIP) shows that investors are getting more comfortable with their understanding of the bank in terms of asset book and growth strategy. Excerpts:
What story did you tell the investors?
The entire (QIP) book was built within half an hour of opening and eventually we had an oversubscription of three times. This (oversubscription) came at a time when there were two other IPOs in the market. And both of them were undersubscribed. Our issue came on the back of very challenging macros. What we told the investors was the reality in terms of what our asset book will look like and our future growth trajectory. Somewhere there was a belief about the ability of this bank to be able to bounce back, generate very strong revenues and access capital on an ongoing basis. I think many of these got demonstrated and that is what gave comfort to a lot of these investors, some of them first time investors, including a very large Indian fund and US-based Key Square Master Fund.
What course correction are you planning for the bank?
Historically, what you have seen is really a very strong structured finance bank. But equally there are two other businesses retail bank and transaction bank, which are good businesses but are undersized. And I think, we needed to show the market a path as to how we would scale these businesses and what that would mean from diversification, revenue generation and client engagement perspectives. So, I think, people (investors) liked that story.
When it comes to asset quality, unlike some of our competitors, our concerns were not really very granular in nature. (In the case of YES Bank) there are a handful of entities which are facing illiquidity. And if those could find resolutions, the complexion of the book would look completely different.
There is a saying that banks will become technology companies with a banking licence. From this perspective, I don't think there is another bank which digitally is as enabled as YES Bank is. And this is something that the market doesn't yet recognise.
How are you addressing concerns around the subinvestment grade book?
There are three names that accounted for nearly 80 per cent of the 'BB and below' rated (subinvestment grade) book. Two out of these should have full resolution in this quarter. So suddenly the sub-investment grade book, which is currently at 29,000 crore, will start to contract. When this happens, the risk perception around the bank will get a little moderated. It will also release capital for us. The two resolutions that I am talking about account for about ?9,000 crore.
Why did you not raise more money?
The reason why we raised this amount and not more, even though the demand was much more, is that right now our (shareholder) approvals were for a 10 per cent dilution. This takes our CET-1 (common equity tier-1 capital) up from 8 per cent to 8.60 per cent. And then through balance-sheet rationalisation, we will try and add another 20-25 basis points.
What are the elements of balance-sheet rationalisation?
De-growing some of our loan book - the wholesale (large corporate) loans.