YES Bank, Asia’s worst-performing bank stock this quarter, plans to raise $1.2 billion over 18 months to bolster its capital buffer through a mix of public and private share sales, Chief Executive Officer (CEO) Ravneet Gill said.
Gill took over in March pledging to improve transparency after his predecessor, founder Rana Kapoor, was forced out by the Indian central bank for inadequate disclosure of stressed loans. The new chief has had a tough ride as rising bad debts and an unexpected loss sent the stock down about 57 per cent this quarter, the worst performance among 569 lenders in Asia.
“The number one priority would be raising capital,” Gill said in an interview in Mumbai on Monday, adding that the infusion would take place in two almost equal tranches with the first likely by the end of September. “Effectively, what we need is growth capital.”
India’s shadow banking woes that emerged last September have revealed cracks in YES Bank’s balance sheet. The country’s fourth-largest private-sector bank has $2.9 billion of exposure to junk-rated firms, including Dewan Housing Finance Corp, and parts of Anil Ambani’s conglomerate, companies at the heart of the unfolding crisis.
Gill said he has been “personally involved on a day-to-day basis,” in dealing with large companies facing repayment difficulties, including for loans extended to Ambani’s firms, Dewan and the Essel Group. The three account for about two-third of the Rs 10,000 crore of loans on the lender’s watchlist, he said.
This list won’t see any significant additions, according to Gill, and YES Bank plans to focus more on cash-flow-based underwriting going forward to ensure timely repayment. The lender also wants to grow retail lending by leveraging its digital platform.
Analysts have been downgrading YES Bank’s stock on concerns over the extent of further deterioration in asset quality and lingering worries over corporate governance after the exit of several of its board members. The proportion of “sell” calls on the stock has reached the highest in nearly a decade, according to data compiled by Bloomberg.