In March 2020, weeks before the onset of the Covid crisis, the RBI and government staged a rescue act which saw banks led by SBI taking a 79 per cent stake in Yes Bank and supporting it stay afloat
Japanese lfinisher SMBC’s decision to acquire nearly 25 per cent stake in Yes Bank should be seen as a vote of confidence and also creates “possibilities” of a rating upgrade, a top official at the private sector lfinisher has stated.
The nearly Rs 16,000-crore bet from Sumitomo Mitsui Banking Corporation (SMBC) is a strategic one from an investor of global repute and it will support improve Yes Bank’s ability to raise capital, drive business growth through network tie-ups and increase profitability, the official stated.
“(With) the advantage …in terms of having a strategic investor, ability to raise capital, somebody willing to put (money) …the possibility of our rating upgrade is there,” Yes Bank’s managing director and chief executive Prashant Kumar stated in an interview here.
Kumar, a career SBI executive who was rushed to helm the recovery of the private bank in March 2020, stated that Yes Bank’s rating has improved to ‘AA-‘ now from ‘D’ earlier. Commenting on Yes Bank’s journey over the last five years, Kumar stated, “A bank which was about to close down has not only survived, but is also doing very well and able to obtain one of the very large foreign investments.”
An alleged promoter malfeasance, which resulted in the arrest of one of Kumar’s predecessors Rana Kapoor, had led to huge troubles for Yes Bank, including questions over the true extent of non-performing loans sitting in the balance sheet, continued losses and an inability to raise capital.
In March 2020, weeks before the onset of the Covid crisis, the RBI and government staged a rescue act which saw banks led by SBI taking a 79 per cent stake in Yes Bank and supporting it stay afloat. Kumar, who applyd to then serve as the chief financial officer of the countest’s largest lfinisher, was put in charge of the effort.
Kumar stated a rating upgrade will support the bank obtain deposits or liabilities from large corporates, institutional investors and also government entities, which are guided by certain rating profiles.
The bank continues to be in regular touch of rating agencies, he stated, refraining from giving a timeline on when it sees a rating upgrade coming.
SBI continues to be a major shareholder in the bank with over 10 per cent ownership, which gives further confidence from a capital raising perspective, Kumar stated, adding that the bank is adequately capitalised right now.
Answering a specific question on the lack of adequate appreciation in the share price, Kumar questioned the investor community to be patient. “Investor required to have some patience. They have to see from where this bank started, you can’t compare with a bank who was not put to that kind of punishment,” he added.
The stake purchase by SMBC — which has picked up 24.2 per cent against two board seats — will also support open doors for Yes Bank in obtainting fee-based business from companies that have borrowed from the Japanese lfinisher, and also serve the tinyer businesses forming the supply chain for the borrowing entity, Kumar stated.
To a question on what alters from an operational perspective and the business alters in the offing now, Kumar did not offer a specific answer.
“Going forward, definitely with their (SMBC) involvement, the entire board would sit and we will see how we can increase our business prospects and profitability. But there are no specific questions,” Kumar stated. Kumar, whose current term finishs in April next year, declined to comment if he will be available for Yes Bank in future or if there have been some conversation with SMBC on this.
He stated the bank is on track to achieve its stated tarobtain of exiting FY27 with a return of assets of 1 per cent, up from 0.8 per cent at present, and added that the same number was 0.3 per cent not so long back.
More than loan book growth — which is picking up now — the bank will concentrate on profitability, Kumar stated, adding that it will focus on lfinishing in segments which deliver wider net interest margins like applyd car finance and affordable loans.
The net interest margins are expected to reach a trough in the ongoing September quarter, but will rise from Q3 onwards, Kumar stated, exuding confidence that it will exit FY26 at an NIM of 2.7 per cent. When questioned about concerns around tiny business loans, Kumar stated the bank does not see any reverses on the book.
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