Putting market concerns regarding YES Banks share price, credit cost guidance and growth-spurring capital raising plans at rest, the private sector lenders Managing Director and Chief Executive Officer Ravneet Gill has reiterated that the banks outlook for the rest of the year remains strong. In a wide-ranging interview with television channel ETNow recently, Gill also talked about the improving resolution prospects of companies under the banks default watchlist and the confidence that the shareholders have shown in the management.
Expressing disappointment over brokerage firm UBSs decision to cut the banks credit cost estimate for 2019-20 (Apr-Mar) without seeking any clarity from the management, Gill retained credit cost guidance at 125 basis points (bps) for the year. I am drawing a line under the (credit cost) guidance, he said, adding further that he will not be changing the guidance by a single basis point.
Gills unwavering faith in the guidance stems from the relatively better liquidity condition and chances of resolution of companies under the lenders non-performing asset watchlist. Since these companies do not just belong to a particular sector or an industry, YES Banks doubtful loan book is not entangled in a sectoral cyclicality trap, where it is dependant on external factors either in terms of regulation, or industry dynamics…to come out of that. According to the newly appointed CEO, the banks stressed portfolio is just a bunch of names which have all, at the same time, experienced a little bit of liquidity (crunch) but they have also made very tangible progress towards resolution. Either that has happened in certain cases or is now on the cusp of happening, he added.
He refuted the claims that the bank has a large exposure to promoter funding and said that the exposure is captured adequately in the guidance that we provided. Gill also hopes that it wont be long before rating agencies remove the YES Banks credit rating from their watchlist as they were put under review due to the liquidity crisis in the NBFC sector in the first place, where the situation is improving. If the concerns were more fundamental, the consequences could have been more severe, he said.
Gill, the former Deutsche Bank India CEO, also dismissed any anxiety over YES Banks growth strategy and its ability to raise capital. Indicating that the bank may be raising funds soon, he said several private equity players have expressed interest in investing in the bank and the management is in discussions with them. …this should be music to the ears of an investor. I am very hopeful that our shareholders should be able to hear that music sooner than later, he insisted.
The bank is also undertaking an intense portfolio optimisation by churning assets which are not valued accretive and substituting them with opportunities to grow where returns are better, he said. Gill believes that once capital comes in, growth will go up and expects the rest of the year to be very strong for the bank. However, he admitted that the bank is currently undergoing a phase where it is focussing on repair and growth simultaneously, but from next year onwards, he expects the strategy to be purely growth-oriented. He said its business model, its risk-taking ability and the way it manages the risk differentiates YES Bank from its competitors. Even though it may require a a few tweaks here and there, in terms of economic and market considerations, the business model per se is very much intact he added.
The Reserve Bank of Indias decision to appoint ex-deputy governor R Gandhi as an additional director on YES Banks board was also welcomed by the private banks MD & CEO Gill as a very positive decision. He thinks that the development should give the market a lot of confidence as it will bring in enhanced transparency and accountability. He also expressed his delight over the faith shown by the banks shareholders at its annual general meeting recently and said that several of them floated the idea of a rights issue to raise capital. It was gratifying to see how much goodwill the bank enjoys among its shareholders, he said.