Yes Bank’s Farsightedness Could Help It Get Back On-Track

There was a time when Yes Bank’s exit from the banking sector seemed real. No private equity players were interested in saving the bank. Everything changed after Yes Bank came under the stewardship of the State Bank of India (SBI). Now PE players are interested in saying ‘Yes’ to Yes Bank.
Yes Bank’s Farsightedness Could Help It Get Back On-Track

What’s Happening?

Yes Bank was in rough waters just two years back. Everybody thought it was going to shut down. The shares began to crash, the debt pile soared, there were corruption allegations against the Chairman, and no one was ready to save the bank except RBI. The lender’s future was uncertain, and a failure of a bank’s operation would raise inconfidence on the entire banking system. Therefore, RBI decided to place Yes Bank under a moratorium.

Yes Bank then came under the umbrella of SBI, India’s largest and trusted bank. The bank has been doing fairly well now. In the third quarter, Yes Bank posted net profit growth of 76% to Rs 266 crore, beating all estimates on the back of lower provisions (down 83% YoY). The asset quality also improved, and there was a recovery in loan growth. It is now rightsizing its corporate loan book and overall demand scenario. 

Looking at this improved environment, a private equity player, Advent International, has shown interest to invest in the bank. Advent is evaluating a Rs 7,500 crore investment in the bank to capitalise on its balance sheet. But the current regulations will be a hindrance, as non-promoters like PE companies cannot buy more than 10% in banks. This means Advent can only buy out 10% of Yes Bank, which is about Rs 3,364 crore. 

Should This Concern You?

Yes Bank has a long way to go, but the consistent improvement in earnings show a ray of hope. The management has been changed, and RBI is monitoring the bank. There seem to be fewer chances of falling out. PE players are showing interest in the bank once again, which is a positive sign. 

Advent had eyes on Yes Bank even before SBI came into the picture. SBI is the largest shareholder in Yes, with a 30% stake. Now in case, SBI decides not to infuse any more capital, then Yes Bank can raise capital from new investors. Anyways, Yes Bank is seeking a partner for an asset reconstruction company (ARC) to warehouse a large portion of its bad loans.

What Lies Ahead?

It seems Yes Bank can rope in a partner to help it capitalise its balance sheet and remove bad loans. It’s a long process, but there’s hope for the bank to progress from hereon. 

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