Yes Bank will boost lending to mid-sized firms to improve return on assets, CEO says

Yes Bank | CMP Rs 26.25 | Shares of Yes Bank fell 3.31 percent after Goldman Sachs downgraded the lender along with SBI Bank and ICICI Bank reasoning the Goldilocks period of strong growth and strong or visible profitability was over for the financial sector for the near term.

Private lender Yes Bank opens new tab will boost lending to small- and mid-sized companies as it tries to push up its return on assets (RoA), its chief executive officer said on Monday.

"The single agenda (for the bank) is to focus on profitability without doing anything aggressively," Prashant Kumar said in an interview. "The first step for us is to achieve a RoA of 1% in the next two years and 1.5% by 3-5 years."

Yes Bank's return on assets - which is the ratio of how profitable a company is compared with its total assets - was at 0.2% for the October-December quarter.

Small-and-medium-enterprise loans and mid-sized corporate loans made up nearly 30% of the Mumbai-based bank's loan book in the December quarter, which Kumar said will be increased to 35% going forward.
The bank is unwilling to compromise on pricing despite intense competition, he said.

"We would not like to go for higher deposit growth by offering higher rates," Kumar said, adding they would also not grow loans by offering a lower rate of interest.

Yes Bank aims to grow overall loans by 13% year-on-year in the March quarter, largely aided by retail loans, while a deposit growth of 15% looks "reasonable", the CEO said.

The bank reported a loan growth of 11.8% in the December quarter, while its deposits grew 13.2%.

"At no point in time credit growth will be higher than the deposit growth," Kumar said.

The CEO does not foresee the need for raising capital for the lender, at least for the next financial year that starts April 1.

The bank aims to open 110 branches by March-end, lower than its earlier target of 150 branches, with the remaining 40 to be opened in the following three months, Kumar said.