In a chat with ET Now, Rana Kapoor, MD & CEO, Yes Bank, says the $1 billion that has been raised via QIP will help the bank complete its large bank phase with a deep enough pocket to grow at 30% for next 3-4 years. Edited excerpts
ET Now: How will you utilise the proceeds that you will garner from this QIP?
Rana Kapoor: This is in accordance with our growth plans as approved by the board and by shareholders as recently as June this yes. So the objective is to really ensure that we have enough capital to achieve our growth objectives and these growth objectives have been somewhat driven by an improving economic environment, the tailwinds in the economy now far exceed the residual headwinds and it is a good time to grow. So we are now quite conditioned at Yes Bank to actually start navigating, somewhat cautiously though, to those certain sectors, sunrise sectors which have demonstrated ability and have proven track record with asset quality preservation. The third phase of our bank's growth -- the large bank phase -- will get a catalyst with this capital raising underway
ET Now: What will be the impact of QIP on your tier-1 capital?
Rana Kapoor: What it does basically is that the core tier-1 ratio should go north of 15%, closer to 15.5% and the capital adequacy of the bank overall should exceed about 19% after this deal is consummated. Actually, with that sort of a capital buffer, our pockets will be deep enough to be able to grow at 30% or around for the next three to four years. So, it is indeed our plan that till 2020 when we complete the third phase of our lifecycle, the large bank phase of Yes Bank, that we should be well stocked on capital and be able to in a way tap the opportunities as a consequence of the economic comeback. So it is a good time to grow now.
ET Now: Can you tell us how long the capital will last? Everybody will now want to know when some other action will come from Yes Bank.
Rana Kapoor: If we grow at 30% I have reason to believe that this capital should last us between three to four years and once we are back to 20% ROEs with a dividend payout strategy of around 20%, we organically grow about 20% so as to retain enough capital through our earnings to be able to grow at that rate, So a $1 billion capital stock injection should allow us to grow nicely for the next three to four years.
ET Now: Talking about the growth outlook again, will you be able to maintain that 30% growth in loan book for the medium to long term?
Rana Kapoor: Yes, indeed. At the beginning of the third phase of our lifecycle which started in April 2015, which I define as the large bank phase of Yes Bank, in a fairly challenging fiscal 2015-2016, the first year of this five-year phase we grew 30%. In the first quarter of the second year 2016-2017 June, we grew 33% and there is very good traction in our core businesses and corporate businesses as well as new streams which are gathering terrific momentum, particularly our MSME business as well as to a very large extent our consumer and retail banking businesses.
We are also seeing fantastic accretion in our CASA deposit base which is nearing 30% so the overall granularity of our deposit base with the resultant impact of reducing cost of funds should actually position the bank in a strong way for the next phase of growth. So the next four years till 2020 we have visibility to grow at 30%.
About YES BANK
YES BANK, India’s fourth largest private sector bank is a high quality, customer centric and service driven Bank. Since inception in 2004, YES BANK has grown into a ‘Full Service Commercial Bank’ providing a complete range of products, services and technology driven digital offerings, catering to corporate, MSME & retail customers. YES BANK operates its Investment banking, Merchant banking & Brokerage businesses through YES SECURITIES and its Mutual Fund business through YES Asset Management (India) Limited, both wholly owned subsidiaries of the Bank. Headquartered in Mumbai, it has a pan-India presence across all 29 states and 7 Union Territories in India including an IBU at GIFT City, and a Representative Office in Abu Dhabi.
For more information, please visit the Bank’s website at http://www.yesbank.in/