Rana Kapoor, MD & CEO of Yes Bank, has chalked out the lender’s growth plans till 2020. In an interview, Mr. Kapoor told Manojit Saha that the bank would be open to inorganic growth opportunities in the asset management and securities businesses.
Excerpts:
Yes Bank completed its second phase – known as Version 2.0 – in March 2015. What is the strategy now in terms of growth?
The large bank phase of the bank started in April 2015. In this phase we are working towards the contribution of retail – branch banking business to be 45 per cent of our total business by March 2020. At present, it is about 33 per cent on the asset side. On the liabilities side, share of retail is 55 per cent as on June end. Our objective is by 2020, by which time we will be 16-and-half years old, to increase retail liabilities to 75 per cent of total.
In addition, we want to increase the share of current and savings account (Casa) deposits from 23 per cent (March 2015) to minimum of 40 per cent or if possible to 42-43 per cent by March 2020. Casa share to total deposits was 29.6 per cent, end of June 2016.
In the large bank phase, retail banking will be the primary driver. Out of 18,000 people we have now, almost 80 per cent are in retail banking business. We plan to add another 7,000 by the end of this phase.
We also plan to increase our branch presence to 2,500 by March 2020 from 900 now. A lot of them may not be large branches, the model of branches will be leaner, smarter.
What kind of business growth are you expecting?
The loan book size is Rs 1.15 lakh crore at present. And our total assets are around Rs 1.8 lakh crore and the target is to take that to Rs 5 lakh crore which means a growth rate of 27-32 per cent in the next four years till March 2020. Typically, in our business the loan composition is about 60 per cent. So, our advances would be roughly about Rs 3 lakh crore. And we should be Rs 3.75 lakh crore in terms of total deposits.
A recent report by Moody’s has highlighted the weakness in funding and liquidity profile of the bank. What steps are you taking to address it?
We are pretty confident that we will have 40 per cent Casa share by March 2020. For a bank which is 12-years-old and has grown at a CAGR exceeding 35 per cent in 12 years to get to around 30 per cent Casa in itself is a ‘hanumaniyan’ achievement.
In the fourth lap, which will start in 2020 and get over in 2025, by that time we should be able to stabilise the Casa ratio at round 44-45 per cent.
The bank’s growth has been organic in nature so far. Are you open to inorganic opportunities, going forward?
The genetics of the bank revolves around one common theme which is the HR (human resources) character which defines the bank as the professionals’ bank of India. Our top mangers in the bank, who are about 90, have an average age of 43 years. The average age of our employees is 31 years. With a homogeneous pool of leaders and bankers, the bank has the ability to grow at very high octane, particularly now when economic tailwinds exceed the headwinds. We were comfortable as a bank to grow at 30-33 per cent at times yet able to manage the quality and put filters around the growth. So now we are conditioned as a bank to grow at 27-32 per cent with the quality filters, with the risk filters, organically. Therefore there is no immediacy in our model to grow inorganically because we are very quality conscious, risk conscious. The system is still new even after 12 years, we do not want to shock the system.
However, if there is an opportunity in the securities business, which we have set up a year ago, we would be receptive to such inorganic measures. We recently got licence to set up an asset management company, there we can look at inorganic possibilities. There are a lot of opportunities in the asset management business for inorganic growth.
While the bank’s bad loan ratio is one of the lowest in the industry, the last few quarters have seen some pressure on asset quality, and in the quarter ended June the provisions have doubled. What is happening?
If you see our business composition now, this is two-thirds corporate and one-third branch - retail banking. The overall gross NPA of the bank is at 0.79 per cent and net NPA 0.29 per cent with provision coverage ratio at 64.2 per cent. The restructured book is at 0.49 per cent of the total loan book. If you compare these numbers with a bellwether bank like HDFC Bank, our asset quality is significantly better than the best of banks in the country in terms of the percentage in relation to our size.
Do you see a bigger role? Do you see yourself entering politics?
I am definitely fascinated by the macroeconomics of the country and public policy which are vital for understanding the business of banking. Beyond that there are no other aspirations. There are a lot of ambitions for me and my team within the bank. I never had that desire (joining politics).
You have about 12 per cent stake in the bank. There is talk in banking circles that you may want to sell your stake ?
I have no such intention, short, medium, long…almost till I am alive. We are at a point in our lifecycle where we can create exponential growth. Banking is the only business that I understand.
