Private sector lender YES Bank has received Expression of Interest (EoI) from two potential investors for the bank’s Rs 48,000 crore mega stressed loan auction, Managing Director and Chief Executive Officer (MD & CEO) Prashant Kumar told Moneycontrol in an interview.
YES Bank Board had on July 15 approved US based JC Flowers Asset Reconstruction Company's bid to be considered the base bid for the proposed sale of stressed assets via Swiss challenge auction.
Further, the lender's Managing Director & CEO said that the bank will “definitely” raise $1 billion during the current fiscal and the timing of capital raise will not impact the bank’s over 15 percent year-on-year (YoY) loan growth target in current fiscal. Edited excerpts:
Can you share updates on the stressed loan auction?
Saturday was the last day for submitting the expression of interest (EoI) and we received two bids for the EoI. Now they will be going through a process of submitting a bid bond worth Rs 175 crore, where the time is available till next one week.
Once they submit the bid bond, they will be allowed access to our data room for doing a due diligence before submitting the final binding term sheet. These bids are only EoI. Only after conducting due diligence will they be in a position to submit financial bid…
Are ARCIL and ARCION the two players?
I would not comment on the names, but these two players were also part of the 13 initial bids submitted by ARCs (asset reconstruction companies)…
Have you finalised the investors for capital raise?
As a banking institution, it is a normal process where we continue to remain engaged with the investors. But definitely during the current fiscal, we have a plan to raise $1 billion capital in the form of CET (equity capital). We are engaging with the investor and at the right moment we will take it forward.
Can we expect the deal to conclude in Q2FY23?
I cannot make any comment. Overall, the situation is so fluid in the market, we need to take a call which is in the best interest of the bank…Today, our CET (common-equity tier I ratio) is at 11.9 percent which is sufficient to take care of the current year’s growth aspiration of 15 percent on loans side.
Last two years we were part of the reconstruction scheme and for us the challenge was always to meet minimum regulatory capital requirement. But now that we are out of the reconstruction scheme, it is important for us to have a capital which is in-line with the market.
If you see, a 14 percent kind of CET ratio is good for a bank which has already moved into a growth trajectory and which takes care of growth requirement for next 2-3 years. That is why we are aiming for $1 billion during the current financial year. Whether H1FY23 or H2FY23, the first thing we need to understand is that timing will not constrain growth requirement for the current year. Even if it happens in second half, like February or March, we would still be able to continue our growth aspiration…
Is SBI looking to monetize its stake in the bank?
I cannot make any comment on behalf of SBI. I think SBI Chairman has already made a statement which we need to read. It is not proper for me to comment on behalf of SBI.
Are you looking to onboard new Board members after formation of an Alternative Board on July 15?
Currently, our Board has ten members. Seven independent directors, two-non independent directors, and MD & CEO. We think this number is an ideal one, and we are not thinking of expanding Board now.
Regarding the appointment for MD & CEO, a new Board came into effect from July 15, and same day they submitted the recommendation (for extension of Kumar’s tenure) to RBI for a period of three years.
It requires time as the RBI takes a decision after due diligence. Whenever they take a decision, it will be informed to the exchanges but it takes time…Normally, what we have seen is that it takes around three months’ time (for due diligence).
How many customers opted for your new repo-linked deposits?
... Currently we are having more than 14,000 customers of this product but we are in very initial stages. I think we will now reach out more to our customers explaining the feature, nuances of this product and we are hopeful that going forward it would get good traction….
Around Rs 300 crore has been generated (so far) as average deposit size here is around Rs 2 lakh…
What would be your business guidance for next 3 years?
If you see our two years track record, whatever we have committed to our stakeholders we have been able to achieve those...We are aspiring to grow loans at 15% YoY, we will be targeting a RoA (Return on assets) of around 75 bps (basis points), but our target is to reach to a minimum of 1 percent-1.5 percent RoA in medium term, that is in the next three years kind of a range.
For achieving that RoA number, there are couple of levers which we are working on. One would be in terms of reducing our cost of funding. That will happen by increasing CASA ratio (low-cost current account and savings account deposits) from 31 percent presently to 40 percent over next 3 years, which will significantly reduce the cost of funding. Second is in terms of growing the loan business.
Your guidance on asset quality for current fiscal?
Slippages for the current year (FY23), we will definitely be able to control within 2 percent and credit cost would also be around 40 basis points…I think continuously we are seeing that we are on an improvement track in terms of containing fresh slippages and better recoveries. Whatever targets we have set for ourselves for the current financial year, we will be able to achieve those and the similar trend will continue in next 3 years.
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