The CEO of Yes Bank Ltd., which helped the lender out of India’s biggest bailout, is bracing for the fallout from the pandemic.
The coronavirus outbreak has “created a problem” in the loan portfolio, even as progress has been made in addressing key drawbacks, such as weak governance, fundraising challenges and declining deposits, said Prashant Kumar. in a phone interview on Saturday.
It is “very, very difficult to estimate the impact,” Kumar said. “Once the fundamental issues are resolved, we want to control costs and increase profits to address any adverse credit impacts from the pandemic.”
Yes Bank returned to earnings in the quarter ended September and Kumar made provisions for potential COVID-related losses. When regulators seized the lender in March, its depositors had been on the run and the bank was struggling to attract investors. State Bank of India bought a stake in Yes Bank and Kumar was pulled from the government-controlled lender to lead the change.
His predecessor Rana Kapoor, who co-founded Yes Bank in 2003 and made it India’s fastest-growing lender, was ousted by the central bank in 2018 amid a dispute over bad debt reporting.
“The market wasn’t even sure how much rot was still in the loan book,” Kumar said.
He decided to play it safe and cover 75% of the credit for possible losses. However, just days after he took over, India announced the world’s strictest blockade to contain the coronavirus.
Kumar went ahead with his plan. It raised about $ 2 billion of additional share capital in July, enough for two years, albeit at a 55% discount from the market price. To strengthen governance, it separated the departments that originate loans, assess risk and resolve stressed assets. Kumar also set aside one hour each day to personally call depositors and assure them the stability of Yes Bank.
READ ALSO: YES Bank posts Rs 129-crore profit; net interest income increases 3.4%
Deposits have risen nearly 30% to Rs 1.36 trillion in the six months ending in September. Kumar aims to increase it to 2 trillion rupees by March 2021.
The loan book for retail and small business clients has not weakened despite the pandemic, he said.
Kumar’s goal for now is to limit costs and create a cash cushion to absorb any unforeseen deterioration in asset quality. He said he wouldn’t want to lay hold of precious capital and identified a delayed return on assets as the biggest risk.
Seven months since Kumar started changing Yes Bank, he is now calling for a partial victory.
“Things have changed drastically,” Kumar said. “I’m sleeping well.”
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