Yes bank


(Parag) #350

This is true for overall human behaviour.

When PNB announced Niraj Modi fraud, they announced with smaller number and them bumped up the number higher.

Similarly, a company announced layoff (more a developed economic phenomenon), which are then followed by subsequent lay off announcements.

Disseminating a bad news in pieces is quite common in the investment world, and Warren Buffet has aptly summarised this when he said: “There is rarely one cockroach in the kitchen”.


(Yatharth) #351

Not correct. As per Information available to me, this is not Yes bank, irrespective of amount of Fee Income in their books.

Also, Tamal had good but not the absolute understanding of Banking Industry. Many a times what he writes/has written is sheer hearsay.


(Jaclyn) #352

@Yatharth, we would love to hear from you more on this topic.

For point (2), someone said the politician name is correct as per the rumours and the bank happens to be Yes Bank. :sob: Remember it is hearsay. But I am ready to trust the hearsay than the MSM, particularly TV channels on what the peddle.


(Yatharth) #353
  1. Almost all old private sector banks are being influenced by politicians. Irrespective of Marquee investors putting in their money, the Banks cannot perform on numbers, stock price may be another thing. One does not need names here.

  2. Two of the largest Private Sector bank and their CEOs, recently in news, have tried to please their political/ministerial bosses than trying to do anything for the value of their own ESOPs. No guesswork needed.

  3. 5-6 listed Private Sector Banks have managed their books very well and will continue to do so. Methodology may be questionable but all that matters is overall health of accounts in the long term and ability to recover loans.

  4. None of the Banks can say that they have give loans to only successful and healthy companies. If this is the case then these Banks will stop growing for in India, given the interest and Tax rates, extremely few business can make money for the long term. So business failure and NPA are a given.

  5. Believing is a personal perspective. One may believe the political philosophy of Naxal, another of Congress, another BJP. What I believe in is , by and large, on a ten year basis, can I make 20%-25% from the financial services sector stocks, on a diversified portfolio, and thus manage the risks. Ask yourself this question and then invest. For me, there is no value in Tamal’s article from investment perspective. Gossip is another thing. The least he could have done was to have named the Banks, like many other seasoned commentators have done.


(Parag) #354

I couldn’t have agreed more @Yatharth.
There is a difference between lending money and which are unlikely to be recovered (e.g. Kingfisher) and lending money to corporates which are likely to be recouped, but there may be some delay. I agree there may be a question mark over reporting this NPA, but as long as money is recovered( and it is within rules), it is ok in my opinion.

The market tends to “Throw the baby out with the bathwaters”, and I think something similar is happening in the private sector banks.


(Jaclyn) #355

Agree with you that people with patience and not swayed by short term news will be rewarded. But the concern which stays top of my mind is how far they will hide the skeletons when some other banks like Kotak, IndusInd & HDFC have lesser divergence related issues compared to them. Axis Bank seem to be the worst amongst the 4. As for ICICI Bank, I don’t read about them much.

Discl: Yes Bank is my top holding.


(Hersh Kapadia) #356

Why is Yes Bank raising equity again. Its been hardly 1 year since it raises USD 700 million


(Parag) #357

In the past, Yes Bank did enabling resolution, which allowed them to raise money when the market present opportunity. This does not mean that they will raise money in a short-term (I could be wrong).

For YB to raise money, they have to demonstrate that the last raised money was a success. Considering that they raise money at Rs 1500 (approx. 300), which is not too far from the current price, I think Yes Bank would not raise money at the current price.

In last con call, Rana Kapoor has said that bank has ROE around 19-20, so they can grow at 20% without further dilution. Yes Bank raised 5k last year, so they still may be holding a considerable chunk of that even now.

So, if Yes Bank, is growing their loan book aggressively in next few quarters, then they would need money quickly. Otherwise, they may wait for some more time.


(Hersh Kapadia) #358

Please check the BSE filing of Yes Bank point no 2 copied below. You are completely right why would the bank propose to raise equity again when the stock price is the same as last fund raise. Also how can INR 5000 crore equity be fully utilized if its only grown its loan book by 25% in 1 year. The funds should have lasted atleast 2-3 years,

Raising of funds by way of issuance of equity shares including but not limited through
preferential issue and/ or Qualified Institutions Placement (QIP) /Global Depository Receipts
(GDRs)/ American Depository Receipts (ADRs)/Foreign Currency Convertible Bonds
(FCCBs)/ or any other methods on private placement basis, subject to regulatory approvals,
as may be required.


(butun) #359

The tricky aspect of wholesale lending (lending to corporates) is that the shit does not hit the roof until skeletons are out in the open. This is not about Yes Bank but general comment.

There are several cases in point. I will point to the most talked about recent event. Suddenly there are so many Jewellery / Diamond defaults / frauds that have come up in last 2 months. Did they turn fraud in few days? Did the management not know?

There is also another aspect which is known as ever-greening. That primarily refers to process of restructuring to keep stressed loans non-delinquent. RBI expects reporting on these so as to classify them as impaired. But, there are ways where it was noticed earlier that banks could circumvent to avoid NPA issues.

Hence, corporate lending is not easy, losses are chunky and it does not appear that the system is very transparent.

Thus, the mitigant in Indian context is not % NPA or provision coverage or comfort of risk management system. The only comfort is authenticity of management and robustness of risk culture. Take your pick.

Else, one fine day RBI will come down heavily to clean the system and then skeletons can not be hidden. This can happen tomorrow or 5 years down the line but then why take that risk?


(Yatharth) #360

Sir, waiting for that day since last several decades. Seriously, but it may never happen given politician-ministry-business nexus.


(Cshar) #361

Yes bank has most exposure to power sector where 33000 MW ( approximately 2 Lakh cr) loans are NPA however will not be recognized by financial system due to already stressed state of system else whole financial system will collapse


(Cshar) #362

We don’t know exact valuation until full clarity on NPA/divergence is provided by management.


(butun) #363

Sirjee, While I fully understand the disappointment but on the ground there has been significant movements. I would not be surprised if it gets tougher to hide NPAs. Here are some to substantiate my view:

These NPAs suddenly did not show up on the charts but they started when “Swachh Bharat” Campaign was initiated in 2014/2015. RBI is not aggressive but they are not shying away either.

In summary, while we can be sceptical of RBI intervention but my 2 cents is that invest in a bank where you think that management is transparent. Because NPAs will show up in P&L sooner than later (Ponzi scheme runs out of steam when the music stops -> Liquidity dries out).


(Kushal Masand) #364

point 4 is ICICI bank.


(Mahendra243) #365

Yes Bank Results

Gross NPS down from 1.72% to 1.28%


(Chirag) #366

Yes Bank came out with excellent set of FY18Q4 numbers and that got reflected in the stock price.

As retail investors we are surrounded by a lot of noise and it help if we don’t lose sight of the numbers in the BS and PL statement. As at the end of the day that is all that matters!


(Yatharth) #367

Agree with you and Yes Bank is still very cheap compared to HDFC/Kotak/Indusind in terms of P/BV. A few more good quarters can make it in the same league of valuations.


(Yogesh Sane) #368

Yes Bank’s numbers are just average. Expectations were really low and stock had underperformed so market reaction was swift. Yes Bank is also part of Sensex, Nifty 50 and other major indices so index huggers must have piled on. Today being F&O expiry day might have had an impact as well.

1.6% ROA is nothing to get excited about especially when drop in ROA from 1.8% to 1.6% is due to rise in bad debt provisions that was forced by RBI. However, this is looking at the rearview mirror. A 56% jump in advances is really the bright spot. It means future interest income will be strong.

Divergences will be an ongoing battle with RBI and investors might choose to ignore it going forward. To me divergences is a serious issue for PSU bank and private banks with no promoter. It may not be a big issue for Yes Bank as undereporting of bad debt is nothing but kicking the can down the road and a private bank has no incentive to do that.

1 billion capital raising is also a sign of strength. If it happens at a price to book value 3.5 or 4, it will boost existing book value per share. Financials tend to rally right around the new capital raising time as can be seen from other cases like Bajaj Finance and HDFC bank. We may be see that with Yes Bank this year.


(Chirag) #369

What I like most about Yes Bank is the CONSISTENCY in top-line and bottom-line growth. According to me good numbers are useless unless they are consistent! Consistency of Yes Bank is on par with HDFC Bank and better than Kotak!