Growth and delivery on returns to investors will be Yes Bank’s chief targets after its $1.1-billion fundraise, MD & CEO Prashant Kumar told Shritama Bose. State Bank of India (SBI) will remain invested in the private lender even after the share lock-in ends in March, he added. Edited excerpts:
What’s next for Yes Bank, with the legacy issues resolved and new investors coming in?
Next is growth and delivery on returns to investors. More importantly, we will have to be more responsive to our customers. We have to ingrain the digital capabilities of the bank into the end-to-end customer journeys.
The lock-in period for your largest shareholder SBI ends in March. What would their strategy be?
The SBI chairman has made a statement that they are not in a hurry to monetise the Yes Bank investment. So SBI is not in a hurry to exit, they will do it when they get a good return on their investment.
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So you expect them to stay on beyond March?
You have set yourself some operational targets. Is there a market share target?
We have been continuously increasing our market share for the last two years. That would happen if you are growing more than the industry growth rate. This is something we would continue to do. But, we are not looking to speed up this part. We need to be cautious in terms of what happens in the economy because of the inflation and the rising interest rate scenario. But if the industry grows at a particular rate, we will definitely grow more than that.
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Which segments will you focus on?
We are focusing more on retail, MSME and the mid market. Last year we grew 32% in these three segments, and we will continue to grow there. We are strong and would continue to grow on small business loans. We’ll also grow personal loans and vehicle loans – personal and commercial. These four segments, along with home loans, contribute almost 75% to our retail lending. We would like to take the proportion of home loans in retail to 20% by FY24 from 13% now. We would also like to grow in the large corporate segment, but that would be granular growth, and not big-ticket exposures.
Competition is stiff in the wholesale segment. How are you positioning yourself?
There’s huge competition, but we also have a range of corporates. We would now be taking care of the AAA-rated kind of corporates. We would definitely like to see how we participate in the consortiums for A-rated or AA-rated corporates. Secondly, we have huge capabilities for transaction banking. So it’s not only about lending to corporates, it’s also about managing their transactions, cash flows and fee income, along with CASA deposits. A pricing war is on for the better-rated corporates as also in the MSME and mid market segments. Banks which are sitting on large deposits, where the CD ratio is low, are in a better position to offer competitive rates, as compared to banks where liquidity is always at a higher cost. That advantage can be neutralised by better customer service, better turnaround time and digital capabilities. We would not like to sacrifice margins only for growth at this time. We are quite confident of being able to grow while protecting and improving on margins.
You have an RoA target of 0.75% this year and 1-1.5% by FY24. What would you focus on to get there?
One would be loan growth. The others would be reduction of funding cost, increasing fee income and also recovery from bad loans.
Is it difficult to reduce funding costs in the current scenario?
When we say reduction in funding costs, it’s not in absolute terms, but in relative terms. Suppose the gap between the one-year FD rate for us and the top banks is 75 basis points, if we are able to reduce that gap, that actually means bringing down the cost of funding. We are continuously reducing that gap. Today, the gap between the one-year (rate) at the best of the banks and ours is 65 bps. It used to be 150-175 bps earlier.
Have you received other bids for your stressed asset pile?
There are two other bids. They would be going through the data room and submitting their financial bids by the end of August. It will take another month or so in terms of completing the entire process.
Will Aditya Puri be the Carlyle nominee on the board?
I don’t know. Carlyle has not told us who their nominee would be. They are waiting for the approval (for the stake buy) to come from the RBI. There’s also the EGM. After all that, they would be giving us the names. We have not entered into conversation with them on this.