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Yes Bank set for mega retail push

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points towards an iron-steel model of a cheetah at full gallop which adorns the tables of Yes Bank’s top management team. “The time for baby steps is over. That’s the speed I am looking at,” he says. 

The new-generation private sector bank, which will complete six years of operations in March 2010, has drawn up the broad contours of its next five-year plan, called Version II, which will see a big push into retail, which now comprises just 1 per cent of the total business. 

The founder, Managing Director & Chief Eexcutive (CEO) of says the bank will roll out the entire suite of retail asset products like educational loans, secured personal loans and of course, credit cards, by 2012. and are the other areas on the radar. 

Rana Kapoor Kapoor says the bank does not want to build the card business through the open market and will tap its existing customers for issuing credit cards. 

Consider the speed at which the bank proposes to move. It is looking at a five-fold rise in its balance sheet to Rs 1,50,000 crore and becoming a mid-size bank by 2015. 

While corporate business will continue to be the bank’s bread and butter with constant innovations, Yes Bank proposes to step up lending to small and medium enterprises (SMEs) in a big way. Kapoor says the plan needs a lot of intelligent planning as it can’t be a me-too strategy. 

But the real focus will be the retail business where the bank proposes to prop up its net interest (NIM) margins. The target is to increase the current account and savings account deposit share from 9 per cent to 25 per cent by 2012. “If we can do this, our should go up from 3 per cent now to between 3.75 per cent and 4 per cent,” Kapoor said. 

This calls for a huge increase in the number of branches. From 123 branches at present, Yes Bank wants to reach 250 branches by 2010, 400 by 2012 and 750 by 2015. The manpower is targeted to go up from 2,700 now to 10,000 by 2015. 

This is a completely different language for a bank which chose to sit out when just about everybody was entering retail banking. Now, it is set to press the accelerator harder. 

Kapoor founded the bank in 2004 with a capital of Rs 200 crore. on Monday, Yes Bank has Rs 2,400 crore income, a balance sheet of nearly Rs 30,000 crore and market capitalisation of Rs 5,000 crore. Its net profit was Rs 304 crore last year. 

Kapoor reels out figures to show why he is proud of what his team members have done so far. Apart from being the fastest-growing bank, Yes Bank has a capital adequacy ratio of 17.6 per cent, which means it can grow over 35 per cent without raising further equity by relying on just its profits and debt capital. The bank has a stable provisioning cover of 51 per cent and the Rs 120 crore restructured loans account for less than 1 per cent of the total loan book. 

The bank had firmed up plans to scale up retail business in 2007-08 but decided against it after sensing the rising risks. 

Ruling out the inorganic route for growth, Kapoor says, “We are not looking at short cuts. The bank would like to be in control to manage risks when it grows upwards of 35 per cent (The current growth rate is 50 per cent).” 

While scripting growth, the top management is clear that the domestic market will be at the centre of operations. Any plans to venture overseas will be driven by the needs of Indian companies which are spreading wings rapidly in international markets. 

Banking being a capital-hungry business, more so when regulators the worldover are raising minimum capital ratios, Yes Bank expects to inject $1.2-1.5 billion capital in three rounds. The first round of about $250 million is expected before the close of this financial year and the next 18-24 months down the line. 

As any expansion of capital may dent the bank’s return on equity (RoE) and earnings per share in the short run, Kapoor is quick to point out that capital injection will be done in such a way that the RoE is restored to 22-24 per cent in five-six quarters. 

The bank wants to keep a tight control over costs. Kapoor said the cost to income ratio would be kept around 40 per cent. 

While giving performance-linked compensation and stock options, Yes Bank has given co-founder status to three top management persons — Rajat Monga, Somak Ghosh and Aditya Sanghi — who have been part of Kapoor’s team since the inception of the bank.

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