Prashant Kumar, Managing Director and CEO of Yes Bank is a seasoned banker. After joining State Bank of India (SBI) as a probationary officer in 1983, Kumar spent three decades at the country's largest lender before taking up the task of resurrecting a nearly failed private bank.
Just four months into the new job and Kumar has already guided the private lender past the most critical phase. Yes Bank has received the much-needed survival capital. It has set out on a fresh course to get back in the competition with much stronger rivals.
Yes Bank was bailed out in March this year by a bank consortium led by SBI after it faced a major crisis on account of fraudulent transactions perpetrated by the previous management. Investigators have subsequently arrested Yes Bank’s former CEO, Rana Kapoor in connection with the case.
In an exclusive interview with Moneycontrol, Kumar spoke on a range of issues including the challenges faced in the last four months and his vision for Yes Bank going ahead.
Four months are over since you took over as Yes Bank’s chief. Was it a voluntary decision to take up this assignment?
I had received a call from the SBI Chairman late evening on March 5 and offered the job of turning around Yes Bank – I was asked to report to work at 8 AM which I did and honestly didn’t have to consider it for long. Today, I am happy that I stand vindicated in my decision, being part of an honest attempt to build an institution, supported by eminent board members and employees who continue to show remarkable resolve towards transforming the bank into a stronger institution.
How would you look at the journey so far?
Backed by India’s largest financial institutions, including SBI, we began our journey of transformation post-March 2020 - it has been extremely fulfilling, both personally and professionally. Unquestionably, it is unprecedented in the history of banking that top financial institutions came together to provide support to another Bank, the only successful resolution in the country so far, wherein an institution retained its identity.
The green shoots of the success of the resolution are clearly visible - we completed the first significant milestone in our transformation journey through the completion of Rs 15,000-crore follow-on public offering, within four months of restarting operations, the largest fundraise in the financial services sector in India, anchored by leading global and domestic institutions. This significant milestone was achieved against a challenging socio-economic backdrop of the COVID-19 situation. It bears testimony to the faith of various stakeholders and the banking fraternity alike in the institution.
Are you satisfied with the improvement in financials?
In a very short span of time, the Bank under the leadership of a reconstituted board and management has returned to profitability with an Operating Profit of Rs 1,147 crore and PAT of Rs 45 crore in Q1 FY2020-21 along with reinforced liquidity, which is well above the required regulatory requirement. The inherent strength of the franchise has also been positively acknowledged by Moody’s with a rating upgrade to B3, credit outlook stable. The rating upgrade acknowledges the Bank's improving financial strength and regained access to external market funds.
And indeed, well begun, is half done. We are geared up to build a transformed ‘Digital Bank’ for the long haul and provide the best possible experience to our customers. Our efforts are in tune with enhancing governance and risk frameworks, translating into a culture of accountability to all our stakeholders.
Regaining lost customer confidence was logically your most arduous task?
Regaining customer trust and confidence is an ongoing process, complemented by demonstrated actions that add value. For the Bank, customers remain our topmost priority - in the last four months, the Bank has launched various products and solutions to cater to the evolving needs of the customers in the COVID-19 induced new normal.
This is reflected in the Q1FY2020-21 results which showed deposit growth of 11.4 percent, quarter-on-quarter and return to profitability within two quarters of resuming operations. I have immense faith in our reinvigorated team and the Bank is now well-positioned to meet its growth objectives.
The Bank is working on three pillars to ensure sustainable growth - driving operational excellence through frugal innovations and digitisation, focus on governance and risk frameworks and sharing success with our stakeholders.
Much of the work remains to be done and we continue to focus our efforts on ensuring that our customers are supported every step of the way.
Could you share how Yes Bank’s customers responded to the new management’s efforts to set things right? Were they supportive or remained sceptical?
The Bank under the newly-constituted board and management, re-prioritised and set key goals that needed immediate attention - we took measures to restore customer and depositor confidence.
The continued support and commitment of the Bank’s employees played a crucial role in rendering seamless services and supporting our customers. I am immensely grateful for their immense contribution to the organization and resilience over the past months.
As an institution, we made collective efforts to create value and go the extra mile to connect with customers and the communities we serve. Despite the tumultuous times seen by the Bank in the recent past, we remain firmly on track to exceed the expectations of our stakeholders.
Our customers are our sole focus – through all our initiatives across the Bank, the emphasis has been to partner and supports our customers and communities, which will translate into an increase in our Retail liability book. Over the last three months, we have seen a positive response from our customers with significant growth in our deposit book and digital transactions.
After four months of taking over, I can confidently say that customers have warmed up to a redefined Yes Bank, which is reflected in the support of depositors in the institution, showcased in our quarterly deposit growth of 11.4% in Q1 FY2020-21.
Post-March, Yes Bank has seen deposit outflows slowing. Could you give an update?
The Bank announced a profit after three quarters in Q1 FY2020-21 (PAT Rs 45 crore), supported by strong deposit growth of 11.4 percent, quarter on quarter. As a Bank, we have strengthened our resolve to deliver on our promise of customer-centricity and technology-led innovation to meet the evolving needs of customers and communities. The support received from all stakeholders, particularly the confidence of our customers in the franchise has been most gratifying.
After the FPO, what is the current situation of the bank as far as capital is concerned?
The Bank is well capitalised for the future and post the successful FPO, our capital adequacy ratio (CRAR) stands at 20 percent and Common Equity Tier 1 (CET1) stands at 13.4 percent. The Bank remains firmly on track to achieve its medium-term objectives and achieve a stable liability mix and lower cost of funds with CASA ratio of more than 40 percent and granular advances with Retail / MSME over 60 percent along with corporate flows and cross-sell through transaction banking along with ROA of 1 percent over the next 1-3 years and 1.5 percent in 3-5 years.
During your past media interactions, you mentioned about realigning focus to retail business from wholesale. How far the bank has progressed on that?
In line with our strategy of transforming into a ‘digital bank’ in the country, we will continue to deliver banking services customized to the needs of our clients. Recently, we have completed two key product journeys for our retail customers – digital savings account opening and digital personal loan, providing both higher interest rates and easy access to finance to customers from the safety and convenience of their homes. The response we have received from the retail customers has been most encouraging.
Further, several ‘digital-first’ services such as digital overdraft against FD, digital self-service portal and WhatsApp banking has been launched in this phase to provide convenience and transaction security to our customers. We will continue to invest in strengthening our digital capabilities to provide a personalized and differentiated banking experience to all our customers. The strength of our partnerships and pan-India retail branch network will help us further accelerate our CASA footprint and make it simpler for our customers to bank with us, anytime anywhere.
Going forward, we will focus on embedding our banking solutions in the customer journey and deliver differentiated experiences, as well as driving engagement and acquisition. We will continue developing next-gen offerings and capabilities around analytics, data management and agile culture.
There are allegations of misselling of the AT1 Bonds by bank’s executives. Has the bank looked into these charges?
The allegations are being investigated by the Bank.
How do you want to position Yes Bank going ahead? What is next on your to-do list for Yes Bank?
As we navigate through the economic headwinds, we will focus on providing the best possible experience for our customers. The Bank’s digital backbone provides a clear competitive advantage – enabling speed and agility. As part of our long-term strategy, we aim to strengthen the market-leading position as a truly digital Bank and investing for growth in our retail and SME businesses. We have also made headway in becoming more data-driven, with a clear focus on advanced analytics to deliver a personalized solution to our customers across retail, SME and corporate. We are also closely monitoring the stress on our credit portfolio on account of legacy issues, current macro-economic and COVID -19 situation.
The building blocks for the execution of a strategy to build a stable Bank are in place and the roadmap includes, a) strong focus on sustained liabilities growth b) creating a granular franchise and balanced mix between wholesale and retail c) sharp focus on cost optimisation while investing in growth opportunities d) reduce large bad-loan book & build a sustainable deposit base and e) conform to the highest standards of risk management, compliance and governance.
What percentage of the bank’s loan book is under moratorium at this stage?
The Bank had given some indication on the moratorium book at the time of declaration of annual results in May. While our numbers were almost in line with RBI’s Financial Stability Report, sharing the specific number of customers availing the moratorium as of now would be misleading.
What is your outlook on asset quality going ahead?
The Bank has a provision coverage ratio of 75 percent on its advances and investments, providing sufficient cushion on the stressed assets. At this point, it is difficult to fully ascertain the impact of the COVID-19 situation since it is still evolving. Given RBI’s loan moratorium and one-time restructuring, the impact on borrowers would only be known in the near future.
The Covid-19 uncertainty is likely to impact the banking sector with GNPAs worsening to 14.7 percent in the worst scenario. Your view?The COVID-19 situation has had an unprecedented impact on economies globally and is one of the most significant events to have occurred in our times. It has changed the way we look at our health, environment, safety, working remotely and other areas of our daily lives. The banking sector, too, is likely to be impacted and accordingly, we have created a cumulative standard asset provisioning of Rs. 880 crore on account of COVID-19.