Until less than a year ago, Yes Bank was touted to be amongst the best Private Sector Banks in India. Over the years, Yes Bank has earned a name to be a high-tech Bank, one which makes good use of technology to innovate with products & services. Yes Bank was probably the first Bank to bring 2-step authentication for Internet Banking facility, at a time when many other banks weren't even offering decent Internet Banking facility. Yes Bank is still the leader in many new generation transaction services like UPI or IMPS or Aadhar-enabled Payment System or API Banking, where it is the Banking partner for many Fintech companies like PhonePe, etc.
Over the last 10-15 years, Yes Bank has built a decent reputation to be amongst the best when it came to Corporate Banking, with lots of innovative products & knowledge-based services. At the same time, it was spreading it's Branch Network to reach a scale of over 1100 branches currently. With a decent number of Branches, spread across most of the important cities in India, Yes Bank has now started focusing on increasing it's Retail & SME Banking business. With a strong 62% Y-o-Y Growth in Retail Loan book, it now constitutes 16.7% of the Total Loan Book, which was just 12.2% a year ago. Even the Retail Term Deposits have grown over 40% Y-o-Y. This momentum is expected to continue in this year & the next, as the Bank wants to widen it's customer reach & reduce dependence on Corporate Banking.
A few days ago, when Yes Bank reported it's first Quarterly Net Loss for Q4FY19, on the back of a large provisioning related to IL&FS exposure, the share price of Yes Bank has been battered like as if the Bank is about to shut down in the near future. Just have a look at the share price movement of Yes Bank over the last 1 year or so:
Yes Bank was trading at near Rs.400 level in August'2018. A few weeks after that, the news of RBI's rejection to extension of Mr. Rana Kapoor's term as MD & CEO came in and the share price got hammered to about Rs.160-170 levels. After stabilising for a few months, it was regaining strength after the appointment of an experienced Banker, Mr. Ravneet Gill as the new MD & CEO of Yes Bank. But the share price is again behaving as if all hell has broken loose on Yes Bank with just one large Provisioning. Somehow I feel that all the Business Channels are working in tandem to write-off Yes Bank's survival chances. I certainly feel that things are certainly not as bad with Yes Bank as they are being made out to be by most of the Business channels as pink newspapers.
{ Latest Mobiles & Best Prices
}
At today's closing price, Yes Bank's Market Cap is just under Rs.32,000 crores. I feel this is nothing short of Crazy. Look at all the PSU Banks. They have much much larger NPA problems, have been writing off loans since the last few years and are still sitting on large Net NPA figures. Even those Banks are trading at better valuations than Yes Bank. Take the case of State Bank of India, India's largest Bank. It has a Loan Book of almost Rs.22 lakh crores, nearly 9 times the size of Yes Bank Loan Book. But it's sitting on Gross NPA of over Rs.1.72 lakh crores, which is nearly 22 times that of Yes Bank's figure. Despite years of large Provisionings, SBI's Net NPA figure still stands at almost Rs.66,000 crores, which is nearly 15 times that of Yes Bank's figure. Still State Bank of India has a Market Cap of over Rs.2.80 lakh crores, which is nearly 9 times that of Yes Bank's figure.
In the adjoining table, I have compared Yes Bank's FY'19 figures with that of Bank of India's FY'19 figures. Bank of India is much much smaller than State Bank of India and hence is within comparable range of Yes Bank.
Bank of India's Loan Book is nearly 57% larger than Yes Bank's Loan Book. Still it's Interest Income & Net Interest Income are just about 40% higher. Clearly indicates Yes Bank's superior yields. On the other hand, BoI's Operating Expenses are 71% higher than Yes Bank's. Which again shows the PSU Bank's Operating inefficiencies when compared to a modern Private Sector Bank. BoI's Provisions are nearly 3 times that of Yes Bank's, which pulled the former into a substantial Net Loss. Thanks to Losses since the last few years, BoI has not been declaring any Dividends since the year 2015. Whereas Yes Bank continues to pay Dividend.
BoI's Gross NPA is nearly 7.7 times that of Yes Bank's figure, while it's Net NPA is still 4.2 times Yes Bank's figure. Despite all these negatives, Bank of India's Market Cap is just about 29% lower than that of Yes Bank's figure. In a couple of years time, Yes Bank will be close to overtaking Bank of India in terms of Total Income, thanks to it's faster growth rates. The management has projected a growth rate of between 15 to 20% for FY'20 and I think it can easily achieve this figure.
The point that I wish to make is that: All the recent negative environment surrounding Yes Bank, created by all the Business Channels & Business dailies, are short term in nature. Their effect with go away after a few weeks. Appointment of a Board member by RBI on Yes Bank's board shouldn't be taken as such a big negative. I think RBI itself has undergone management change recently and the new Governor wants to play it safe. Having their nominee on Yes Bank's board will help the Bank to regain it's reputation sooner rather than later. I think this is an excellent opportunity for Long Term Investors to get into Yes Bank. I still have faith in Yes Bank and believe that it has what it takes to be the next HDFC Bank or something on those lines. Just give it some time.
Do Share your thoughts on this report or Views on the points discussed. Awaiting your Comments.
Over the last 10-15 years, Yes Bank has built a decent reputation to be amongst the best when it came to Corporate Banking, with lots of innovative products & knowledge-based services. At the same time, it was spreading it's Branch Network to reach a scale of over 1100 branches currently. With a decent number of Branches, spread across most of the important cities in India, Yes Bank has now started focusing on increasing it's Retail & SME Banking business. With a strong 62% Y-o-Y Growth in Retail Loan book, it now constitutes 16.7% of the Total Loan Book, which was just 12.2% a year ago. Even the Retail Term Deposits have grown over 40% Y-o-Y. This momentum is expected to continue in this year & the next, as the Bank wants to widen it's customer reach & reduce dependence on Corporate Banking.
A few days ago, when Yes Bank reported it's first Quarterly Net Loss for Q4FY19, on the back of a large provisioning related to IL&FS exposure, the share price of Yes Bank has been battered like as if the Bank is about to shut down in the near future. Just have a look at the share price movement of Yes Bank over the last 1 year or so:
Yes Bank was trading at near Rs.400 level in August'2018. A few weeks after that, the news of RBI's rejection to extension of Mr. Rana Kapoor's term as MD & CEO came in and the share price got hammered to about Rs.160-170 levels. After stabilising for a few months, it was regaining strength after the appointment of an experienced Banker, Mr. Ravneet Gill as the new MD & CEO of Yes Bank. But the share price is again behaving as if all hell has broken loose on Yes Bank with just one large Provisioning. Somehow I feel that all the Business Channels are working in tandem to write-off Yes Bank's survival chances. I certainly feel that things are certainly not as bad with Yes Bank as they are being made out to be by most of the Business channels as pink newspapers.
{ Latest Mobiles & Best Prices
}At today's closing price, Yes Bank's Market Cap is just under Rs.32,000 crores. I feel this is nothing short of Crazy. Look at all the PSU Banks. They have much much larger NPA problems, have been writing off loans since the last few years and are still sitting on large Net NPA figures. Even those Banks are trading at better valuations than Yes Bank. Take the case of State Bank of India, India's largest Bank. It has a Loan Book of almost Rs.22 lakh crores, nearly 9 times the size of Yes Bank Loan Book. But it's sitting on Gross NPA of over Rs.1.72 lakh crores, which is nearly 22 times that of Yes Bank's figure. Despite years of large Provisionings, SBI's Net NPA figure still stands at almost Rs.66,000 crores, which is nearly 15 times that of Yes Bank's figure. Still State Bank of India has a Market Cap of over Rs.2.80 lakh crores, which is nearly 9 times that of Yes Bank's figure.
Bank of India's Loan Book is nearly 57% larger than Yes Bank's Loan Book. Still it's Interest Income & Net Interest Income are just about 40% higher. Clearly indicates Yes Bank's superior yields. On the other hand, BoI's Operating Expenses are 71% higher than Yes Bank's. Which again shows the PSU Bank's Operating inefficiencies when compared to a modern Private Sector Bank. BoI's Provisions are nearly 3 times that of Yes Bank's, which pulled the former into a substantial Net Loss. Thanks to Losses since the last few years, BoI has not been declaring any Dividends since the year 2015. Whereas Yes Bank continues to pay Dividend.
BoI's Gross NPA is nearly 7.7 times that of Yes Bank's figure, while it's Net NPA is still 4.2 times Yes Bank's figure. Despite all these negatives, Bank of India's Market Cap is just about 29% lower than that of Yes Bank's figure. In a couple of years time, Yes Bank will be close to overtaking Bank of India in terms of Total Income, thanks to it's faster growth rates. The management has projected a growth rate of between 15 to 20% for FY'20 and I think it can easily achieve this figure.
The point that I wish to make is that: All the recent negative environment surrounding Yes Bank, created by all the Business Channels & Business dailies, are short term in nature. Their effect with go away after a few weeks. Appointment of a Board member by RBI on Yes Bank's board shouldn't be taken as such a big negative. I think RBI itself has undergone management change recently and the new Governor wants to play it safe. Having their nominee on Yes Bank's board will help the Bank to regain it's reputation sooner rather than later. I think this is an excellent opportunity for Long Term Investors to get into Yes Bank. I still have faith in Yes Bank and believe that it has what it takes to be the next HDFC Bank or something on those lines. Just give it some time.
Do Share your thoughts on this report or Views on the points discussed. Awaiting your Comments.
5 comments:
RBI rejected extension on which grounds ?
RBI rejected Rana Kapoor's extension mainly on the grounds of Corporate Governance and insufficient Compliance to Regulatory standards. While RBI keeps a check on working of all banks and seeks corrective action wherever necessary, Yes Bank's Rana Kapoor seems to have ignored some of RBI's compliance related recommendations. The new MD & CEO is an experienced hand and has taken over the job on 1st March'19. As with most banks, the new MD generally starts with cleaning up of the mess created by the previous MD. I won't be surprised if there is another big NPA provisioning in Q1FY20. But after that it should be strong action towards business growth.
Yes. I fully agree. Yes Bank infact have received so many awards for Technology Products. Its performance in the past quarter to quarter had been excellent.
What is retail and SME banking?
Retail Banking mainly deals with Savings Account, Fixed Deposits from individuals, Car Loans, Home Loans, Personal Loans, etc.
SME Banking includes services for Small & Medium Enterprises, stuff like Current Accounts, Cash Management, Business Loans or Working Capital Loans, etc.
Yes Bank also provides advisory services to SMEs to improve their business prospects.
Post a Comment