In 2004, when YES Bank opened its first branch in Mumbai, many scoffed at founder Rana Kapoor’s idea of building a world-class banking institution in India through a start-up. After fifteen years, nearly 1,200 branches and over 300% increase in shareholder value, when Kapoor steps down from the helm at the end of January, he can proudly look back at one of the largest private banks in the country, which at the brink of a transformative transition.
YES Bank’s story has been one of ambitious, yet purposeful, dreams; one which was born in a young student’s head while admiring the famous New York City skyline dotted with lofty buildings of global banking organizations in the late seventies. Kapoor spent over two decades learning the nuances of the financial world at Bank of America and ANZ Grindlays Investment Bank, before laying the foundation stone of the “new generation” bank with his brother-in-law, late Ashok Kapur.
In its early years, the Mumbai-headquartered bank grew at a healthy pace and made a successful debut on the national stock exchanges in 2005. However, the young institution was shaken to its core, both emotionally and operationally, after the sudden demise of Kapur during the 26/11 terrorist attack on the financial heart of the country in 2008.
The economic prosperity of a country is often linked with the growth of its banking industry. The 2008 assault on the nation and the bank, further strengthened Rana’s resolve to create the “best quality bank of the world” in India. The tremendous growth and new-age initiatives over the last decade show that bank remains well on the path to achieving that target.
In the last ten years, with Kapoor as the MD and CEO, the bank has tripled its geographic presence and registered a 15-fold jump in total assets to over 3 trillion rupees at the end of FY18. It has been one of the leaders in innovating in the banking space and is on the forefront of the digitization movement, with the highest market share in merchant payments through Unified Payments Interface (UPI).
YES Bank’s efforts and growth, under the leadership of Kapoor, has been well-recognized by the markets, with its shares rising over 200% over the last five years, generating stunning returns for the investors. In fact, till the ambiguous regulatory disruptions in August 2008 which forced one of the first “professional entrepreneurs” to hang his boots, the stock has given the highest return on shareholder value in the banking sectors. Till August, the performance of its was two-three folds better than any of other private banks such as Kotak Mahindra Bank and ICICI Bank over a five-year period.
Uncertain regulations and a negative media cycle hampered the stock, with media circles, with little business finesse claiming that Kapoor will set a “stooge” as his replacement to guide the bank its next phase of growth. These concerns were effectively dismissed when the bank did what any other institution focused on growth and good corporate governance would do – it picked a resolute professional with a demonstrated history of delivering transformations.
On Jan 24, YES Bank announced that Ravneet Singh Gill will take over the operations of the bank by March as the new managing director and CEO. Gill who has built his reputation over almost three decades at the Deutsche Bank, where he currently heads the India business. Under his guidance, Deutsche Bank has been able to maintain one of the lowest non-performing assets ratio in the industry and deliver a top-notch return on equity. It is no surprise, that Gill’s appointment has been celebrated by the investors and the industry participants, with its shares soaring by doubles digits after the announcement.
Brokerage house Nirmal Bang Securities in a recent report said that the Gill will bring in the best corporate governance practices and his experience in investment and corporate banking can propel YES Bank to further heights. This, supported by the lender’s robust Oct-Dec performance, has led most analysts to turn positive on the bank with a “buy” recommendation. Analysts believe that while the short-term performance of stock may have been volatile due to some trigger-happy investors, its long-term potential remains intact. Brokerage ICICI Direct, which sees at least 33% upside in the scrip from the current level, expects the banks return on equity to improve up to 19%.
In the coming days, the bank will enter a new phase of transition, of change, which is expecting to lead to further value creation for the bank and its shareholders. While Kapoor remains the largest shareholder in the bank with near-500-billion-rupee in market capitalization, his departure from the day-to-day operations of the bank does not necessarily mean the end of his vision. Most believe that it’s going to be the same vision, but with a new perspective, of a building the world’s best bank.
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