Yes Bank Plans To Raise $1.2 Bn To Boost Capital, Says CEO Ravneet Gill

Yes Bank Ltd, Asia’s worst-performing bank stock this quarter, plans to raise $1.2 billion over 18 months to bolster its capital buffer through a mix of public and private share sales, Chief Executive Officer Ravneet Gill said.

Gill took over in March pledging to improve transparency after his predecessor and the bank’s founder Rana Kapoor was forced out by the RBI for inadequate disclosure of stressed loans. The new chief has had a tough ride as rising bad debts and an unexpected loss sent the stock down about 57 per cent this quarter, the worst performance among 569 lenders in Asia.

Also read: No plans to make a comeback on YES Bank board: Rana Kapoor

“The No.1 priority would be raising capital,” Gill said in an interview in Mumbai on Monday, adding that the infusion would take place in two almost equal tranches with the first likely by the end of September. “Effectively, what we need is growth capital.”

India’s shadow banking woes that emerged last September have revealed cracks in Yes Bank’s balance sheet. The country’s fourth-largest private-sector bank has Rs 20,000 crore ($2.9 billion) of exposure to junk-rated firms, including Dewan Housing Finance Corp and parts of Anil Ambani’s conglomerate companies at the heart of the unfolding crisis.

Gill said he has been personally involved on a day-to-day basis, in dealing with large companies facing repayment difficulties, including for loans extended to Ambani’s firms, Dewan and the Essel Group. The three account for about two-third of the Rs 10,000 crore of loans on the lenders watchlist, he said.

“This list wont see any significant additions,” according to Gill, and Yes Bank plans to focus more on cash-flow-based underwriting going forward to ensure timely repayment. The lender also wants to grow retail lending by leveraging its digital platform.

Analysts have been downgrading Yes Bank’s stock on concerns over the extent of further deterioration in asset quality and lingering worries over corporate governance after the exit of several of its board members. The proportion of sell calls on the stock has reached the highest in nearly a decade, according to data compiled by Bloomberg.

Also read: Moody's places Yes Bank ratings under review for a downgrade

Such concerns were heightened last month when the RBI, in a rare step, appointed a former deputy governor to Yes Bank’s board after the lender set aside Rs 3,660 crore for loan losses and other provisioning, pushing it to a surprise quarterly loss.

“The regulator’s move was a big positive,” Gill said. “They wanted to open another channel of communication, they wanted to strengthen the governance of the board, they wanted to make sure the board is independent.”

Also read: RBI appoints R Gandhi on board of YES Bank

Yes Bank needs all the help it can get in reassuring investors as Gill works to expedite fund raising. The bank’s capital buffers have fallen as bad-loan provisioning surged, constraining its ability to extend credit. Its core equity capital ratio or CET1 fell to 8.4 per cent as of March 31, the lowest among the top five private-sector lenders in the country, from 9.7 per cent a year earlier.

“At the end of the day every organisation goes though ups and downs,” Gill said. “Are these challenging times for Yes Bank? These are challenging times for Yes Bank, but I think people underestimate the resilience of the organisation.”