The coronavirus pandemic that left the globe on its knees last year also hit the banking sector hard. YES Bank was particularly affected, considering its reconstruction in March 2020, when the first global lockdown was announced. Since then, however, the Bank has come far in its growth journey, reporting an increase in its depositor base, operating profits and loan book.
In financial year 2020-21, YES Bank saw a marked rise in deposits as well as operating profits, which respectively grew 55% and 42% year on year. Prashant Kumar, YES Bank’s MD-CEO, was quoted as saying, “We are very happy in terms of what we have achieved.”
Path to recovery
A key focus area and one of the major growth parameters for the Bank has been current accounts and savings accounts (CASA), which improved by 51.8% to Rs 42,587 crore in FY21 from Rs 28,063 crore from FY20. Furthermore, a YoY growth of 9% in net interest income (NII) owing to interest reversals ordered by the SC makes the immediate future look positive for the Bank.
The recapitalization drive at YES Bank generated ₹15,000 crore via follow-on public offers in July 2020. The compensation policies stand revised with a view to boost performance and bring down operating expenses. The lender’s operating expenses went down by 14% YoY in FY21.
Along with this, YES Bank continued to sharpen its focus on digital payments, steadily improving its market share in UPI and IMPS transactions.
Meanwhile, despite the pandemic, YES Bank has seen an increase in retail loans by 23%. More than half of the Bank’s total loan book is comprised of retail and MSME advances, out of which only 1% are NPAs. The mix of MSME and Retail now makes up 51% of the loan book. The Bank also displayed the highest-ever income through retail fee in Q4FY21, at Rs 421 crore.
With a provision coverage ratio of almost 79%, the Bank is also ready to tackle the impact of bad loans without risking the carry-forward of legacy issues into FY22.
The Road to the Future
The private lender is optimistic about growing its loan book this fiscal by at least 15%. The projected ambitious growth target stems from the Bank’s CET, standing at 11% (300 bps more than required by regulators), which gives the Bank enough capital cushion to back its growth targets for FY22. Kumar also said the lender’s CRAR stands at 17.5%, leaving enough wiggle-room in case there are further challenges posed by to the ongoing second wave of COVID-19.
The Bank is also inclined to achieve a 20% growth in lending to retailers with good asset quality. Since the pandemic has reduced private sector investments, lending to corporates is not an option; and investing in retailers shows high promise, according to Kumar. He also stressed that the Bank’s corporate books have been de-risked, and the lender is now ready to shift focus to achieving a 10% growth in these books. The lender has a comfortable liquidity pool of Rs 300 crore for such loans.
In a nutshell, with credit ratings moving up, focused customer outreach and collaborations with the government, fintech platforms, etc., Yes Bank appears on track on regain a strong position in retail and business segments.
This is partnered post.