We expect big-ticket resolutions by Sept: YES Bank CEO Ravneet Gill

We see a lot of opportunities in our corporate finance business, retail bank and transaction bank, says Gill

It's baptism by fire for 56-year-old Ravneet Gill, MD & CEO of YES Bank. The bank’s stock price is down 54 per cent since March 1 – the day Gill took charge at its headquarters in Mumbai from his previous position as Deutsche Bank India head. In an interview to Dev Chatterjee and Abhijit Lele, Gill says the bank’s clean-up plan is on schedule and some of its big-ticket bad debt accounts will be sorted out by September, thus clearing an overhang on the bank. Edited excerpts:

Given the fall in share price, is it the right time to raise funds from the equity market? 

If we look at medium-term perspective, the total capital requirement for the bank would be a little north of $1 billion. We are still assessing how much to raise and at what price. Ideally speaking, we don’t want to dilute equity at such a low price. But at the end of the day, we have to do what is in the best interests of the bank. If we do well, the share price will look after itself. We plan to raise capital by September.

What is your message to your shareholders? 

We have been upfront about our sub-investment grade portfolio and within that if we have seen some inherent weakness, we have called it out well in advance. We have made contingency provisions as well. For some other banks, non-performing assets (NPAs) continued to rise because they had loans to cyclical businesses like power, cement and steel. These banks were stuck till the end of the cycle or till these sectors recovered. In our case, that's not the issue. For us it's just a couple of concentrated exposures which are facing liquidity issues.

YES Bank has a sizeable exposure to the Essel Group, the Anil Ambani group companies, and Dewan Housing Finance. What is the status of these accounts?

These companies are taking steps to solve the issue either by stake sale or asset sale. They have very good assets and I expect some resolution by September. The turnaround in these companies would be very quick as new investors come in.

What led to the departure of two directors recently, and is the bank looking to revamp its board? 

Two directors have quit. One of them wanted to quit earlier to pursue his academic interest, but due to the transition, he was asked to stay on. The second director wanted to pursue other personal interests, so he decided to move on. These are both unrelated departures but the timing was just coincidental. We now look forward to appointing more additional directors. We have 11 board members and can increase it to 14, and we are looking at adding more members, which include executive directors.  

Are you comfortable with the bank’s exposure to the real estate sector? 

Our real estate exposure is certainly better than what we thought earlier. We had concerns around liquidity, or around the ability of certain counterparties to service their loans. So when we went into the fourth quarter of FY19, we had made contingency provisioning for four real estate accounts. If we look at the overall macro environment, the credit shortage and the non-banking finance company (NBFC) crisis has had an impact on demand and has posed a unique set of challenges for the industry. 

Where will YES Bank’s growth come from keeping in mind the slowdown in the economy?

We see a lot of opportunities in our corporate finance business, retail bank and transaction bank. The funding of working capital is another big growth area. If we look at the credit markets right now, clearly NBFCs are in a consolidation mode and not in the growth mode; the public sector banks require recapitalisation. So even if the space is not growing quite rapidly, the number of participants and their ability to make a meaningful intervention right now is limited. And to that extent, there’s enough vacuum that exists in the market for private sector banks like us to step in and make a difference.

Do you see any green shoots as far as credit growth is concerned, or will the wait for revival be longer? 

It’s very hard to make a judgement. Typically, when there are elections in the country, everything comes to a standstill. The better barometer will be the second quarter. The first quarter was really a pause as investors are waiting to see which government comes to power, and what its economic policy will be and what will come from the Budget. The NBFC crisis has impacted consumer spending and sentiment. But I do think that by the next quarter end, things would change for positive for the bank and for the economy as well.