oh , thanks for confirming. I thought they have cancelled the decision of RK to be CEO till Jan 2019.
Board meeting asked for an extension for RKās term till next year. Makes it clear the succession plan isnāt in place. Have elevated 2 SVPās (Rajat Monga and Pralay Mondal) to the Board as Executive Director. Maybe one of them willl be the contingency CEO if RBI says final No to Rana?
This meeting didnāt really have a concrete way ahead. Whatāll he do with one more year?
The appointment of the top two candidates as EDs as part of the ālong termā succession plan, tells me two things:
- It is unlikely that either of them will be the chosen MD & CEO candidate. Most probably it will be an external person. Hence, the request for a time extension as well (although Iām quite sure RBI will deny the extension). An external candidate will certainly be positive for the bankās future.
- Their promotion was more so to retain them in the firm by giving them a promotion.
Hmm could beā¦I was expecting some more clarity to emerge after todayā¦but it hasnāt really comeā¦long term I think itāll be best for everyone, including RK, for him to movr onā¦let the new guard take over, clean the Books and bring about next phase of growth.
True. It seems people had more expectations from the board in terms of timelines of the new CEOās appointment. Besides, they have introduced a new uncertainty now as to whether RBI will approve the extension or not.
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The board has requested the Reserve Bank of India (RBI) to grant an extension to Kapoor up to September 2019 āfor finalisation of audited financial statements for fiscal year ending March 2019 and in order for the statutory AGM process to be completed.ā
Disc. Invested since long.
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Sir but in my opinion, this upside will take long time to materialize. I expect Yes Bank to declare extraordinary provisions after new leadership takes over which will result in loss thereby affecting the stock price.
If RK stays for another year as well, I donāt think it is beneficial for investors coz RBI might keep egging him for some issue or the other. Donāt think he will mend his ways so easily. This again will affect the share price negatively.
Overall, I think the stock will take its time to get past issues and recover.
These seem mouth watering valuationsā¦ 75k crore CASA which is growing at 30-40%ā¦ Avaliable at <2 times book value.
In the hindsight, these could seem fantastic prices to be buyingā¦
Disc. : invested (after the fall) n looking to add
2 Likes
Itās a qustion only time can answer. Our job as an investor is not to predict a future, but to place bets when odds are in our favour. Obviously there are governance, regulatory and disclosure issues. But the real question is does the institution has organizational depth to overcome and outgrow them. I believe Yes Bank does have the skills and resources to overcome this downturn. More importantly, for years to come, it does not have to fight HDFC or Kotak. It just needs to take incremental marketshare from PSU banks, which is not so difficult task.
In the finance world, almost everyone evergreens. Do you really believe an NBFC quoting at 8x P/B has 1% NPA? Info from the ground indicates otherwise.
Now this line of thought may be right or may be wrong, an investor cant know or cant verify. So preferable option would be to wait till the stock shows some kind of strength by breaking upwards its 50 DMA or indicates some other kind of strength.
At that point, the stock may be 10-20% pricey from here but odds in our favour would be a lot better.
4 Likes
Why does it not have to fight HDFC and the others? It doesnāt have any particular moat, so does not it have to compete, now more than ever?
Which NBFC were you referring to? Bajaj Finance?
I believe while it does need to compete with other pvt sector banks there is certainly a lot of low hanging fruit out there due PSU banks being under PCA and not being able to lend or provide the kind of service that pvt sector banks can offer.
YES bank too has to raise the Growth capital for growing the credit book that they were planning and now it might get delayed now due to ongoing issues and uncertainty around new leadership , when things will return back to BAU.
Yes bank
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Things to watch out
Sep-25-2018 board meeting
Jan-31-2019 last day of Rana kapoor
Q2 FY19 results and earning call
Check RBI divergence numbers for FY18 in September or October 2018 .
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Why I want to buy this company ?
Price - this is available to cheap compare to other Pvt banks on P/BV 2 times as against 4 times of top 3 Pvt banks - down by 30% in Sep-21-2018.
4th largest pvt bank and part of nifty .
Iām the account holder of yes bank past 6 years - they have innovate methods to raise casa levels like introduce 6% interest on saving accounts .
Mission - by 2025 , india finest quality large bank - do they surpass hdfc , kotak, indus Ind
Did I catch falling knife ?
I have clear mind with entry and exit prices - below
2 times entry and above 3 times exit price .
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5 Key variables
Management issue - Rana Kapoor and successor by Jan-31-2019
Divergence of NPA by RBI and yes bank
Cost of capital and growth, advances growth, Credit growth, Interest rates - higher interest rates make less credit growth - corporate loan growth of Yes vs retail loan growth of Yes
NPA , CASA , P/BV , CAR, Market cap, NPA/Market Cap
My check list
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BofA market cap -$310 billion
Hdfc bank - 5.35 lac cr @ $ as Rs 70 - around $75 billion
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Corporate loans stand 65% of advances in Q1 FY19 .
This company survive without Rana Kapoor ?
Promotor has 20% stake holding ( 5% of Rana Kapoor and 9% of sister in law ) - with 3 Trillion asset base , RBI wonāt allow to fail this bank near future .
Uncertainty with low risk - is yes bank falls on same category now ? Or some real issue persisted ?
Why RBI not telling reason to let Rana Kapoor go out by Jan-31-2019 ? Do they find successor ?
As per ET, RBI thinks - 1. Weak compliance culture 2. Weak Governance 3 . Wrong asset qualification
The bankās financial report for FY16, showed gross NPAs worth Rs 748.9 crore, while as per RBIās assessment, that should have been up to Rs 4,925 crore. This would mean Yes Bank reported a divergence of Rs 4,176.7 crore.
As on March 2017, the bank further revealed a divergence of massive Rs 6,355.2 crore. Yes Bank posted a gross NPA of Rs 2,018.6 crore, while as per RBIās assessment it should have been Rs 8,373.8 crore. From this, it quite clear, why Yes Bank got on the nerves of RBI, after all the divergence were not marginal but breathtaking.
With one and half year profits sufficient to take care of divergence of NPA by RBI .
Vested interest behind Rana Kapoor removal ?
In fact, an August 8 2018 report of the appointments division of department of banking regulation in RBI had noted that Yes Bankās performance was better than most private sector banks. The division had recommended re-appointment of Kapoor as MD & CEO for three years starting September 1, 2019. Industry insiders believe vested interests could have played a role in Kapoor not getting an extension.
This, Hazari, points out, is because, of a Bombay High Court ruling in 2015, which requires that a whole-time director for a bank needs to be jointly recommended by both promoters [Rana Kapoor and the survivors of Ashok Kapur]. It is well known fact that both families have not agreed on a lot of issues, so far.
In 2013, Kapurās wife Madhu, who inherited the stake, dragged Yes Bank to court demanding equal voting rights to nominate a director on the companyās board. The two-year-long court battle took a nasty turn with some name calling. Kapoorās niece, Shagun Gogia (Madhuās daughter) said that āRana uncle has made this a modern-day Mahabharat.ā
Who is the auditor ?
Bsr & co
Hemindra Hazari findings on yes bank - He is bear on this stock long time -
A companyās annual accounts are sacrosanct as they are the bedrock for market valuation and determining senior management compensation. Suppressing NPAs and inflating net profit are cardinal sins, demanding the instant removal of the CEO, the Chief Financial Officer, head of the boardās audit committee and the auditor," said independent analyst Hemindra Hazari in a research note in June.
In FY18, Yes Bank had also classified two corporate accounts - Reliance Naval Engineering (RNE) and Matix Fertilisers & Chemicals - as performing when most banks having exposure had classified same as an NPA. In its defence, the bank said RNE was a performing account on its books and had adequate collateral.
"In India, bank CEOs can defy the banking regulator and merrily produce fudged accounts without any fear of censure. Worse, shareholders not only fail to punish the CEO, but actually reward the individual with another term," Hazari stated.
"Sadly, the Yes Bank episode totally exposes the hypocrisy of institutional investors, who are supported and advised by experienced analysts and who regularly preach the virtues of corporate governance and transparency. As custodians of public funds, their commitment is found wanting," he added.
market expert Hemindra Hazari says that private sector bankās corporate governance practices are equally poor. āThis entire image about private sector banks having better corporate governance and asset quality has been a myth. I have been trying to expose this. Unfortunately, the stock market analysts, mainstream media and the regulator have chosen to turn a blind eye,ā Hemindra Hazari, a SEBI registered research analyst told in an interview to ET Now.
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As on Mar-31-2018 , total NPA in banks 10.25 lac cr ; PSB has 9 lac cr and Pvt banks has 1.25 lac cr .
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On Sep-21-2018, around 5% of market cap delivery based - who bought 11 crore shares out of 230 crore shares ?
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Find out average P/BV in last 5 to 10 years ?
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Management
Who is madhu Kapoor ? He has 7.62% stake and pledged 9.49%
Rana Kapoor - founder and CEO - he worked in BofA in past and sold nbfc in 2003 and started yes bank and ipo came on May-2005 issue price of 45 .
Rana knows in and out of game in corporate lending - he is 61 ( dob sep-9-1957 )
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Valutions
Total shares - 230.57 cr ( 2 305 713 095 ) as on Jun-31-2018 .
June-2018
Promotor 20% + MF 11.56% + FPI 42% + other institution 13.6% + retail 12.3%
PAT - 4200 cr
BV Hdfc - 4.82 , kotak - 4.32 , indus - 4.33 , ICICI - 2
Buy below 2 times of BV 116 - Below Rs 232 accumulate price .
Current BV of yes 116 as on Sep-21-2018 - expecting at least 3 times in next 2 years by sep-2020 unless some crisis like 2008 in world or India .
3 times book of 116 = 348 consider to exit price and avg consensus of investment firms gave around 350 ( 52% from 230 )
What is 1.5 times of 116 - 174 is key support unless something really bad like NPA goes beyond 8% levels ( -23% from 230 ) - Risk:Reward 1:2
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Key ratios
Total Business Value ( Assets ) 3 lac cr ( 3 Trillion )
Total Deposits 2.007 lac cr ( marketshare 1.7% )
Total Advances 2.035 lac cr ( market share 2.3% )
NIM
NII
CASA 36.5% ( 44,400 cr, market share of CA 2.5% + 28,800 cr , SA 1.2% )
Net NPA 0.59% (1260 cr as of Q1FY19 end )
Gross NPA Value
Gross NPA 1.31%(2825 cr as of Q1FY19 end )
Provisions
CAR 17.3% ( tier-1 12.8% ) in Q1 FY19
ROA 1.5%
ROE > 17%
Total Branches 1100+
Total Employees 18000+
Total Internet Users
Total ATM
BV 111(fy18)
EPS 4233 cr - 4233/230 = 18
P/E 226/18 = 12.55 as on Sep-23-2018 with FY18
Total Shares 230.57 cr
Dividend
Price @ 228 as on Sep-23-2018
Market cap 52,305 cr
NPA/Market cap ratio
P/BV 2.05 (228/111) fy18 end
Shareholding pattern
Total Clients
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Lending -
67.6% corporate
14% retail
18.4% SME
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FY18 Annual report
Assets grown 45% yoy - do they see same growth ?
Total assets - 3.124 lac cr in FY18 vs 2.150 lac cr in FY17 .
1.891 lac cr advances in fy 18 vs 1.322 lac cr in fy 19 - growth of 53.9% in domestic loans
If management changes , can new management raise capital for future growth ? - I mean raw material of profits ?
19.5% should invest in govt bonds as per RBI rule - yes has 68,398 cr in govt bonds (SLR) and cash and balance with RBI , other banks has 24,734 cr .
Liabilities -
deposits 2 lac crore ( casa+ TD ) ,
borrowings ( 74,893 cr ) - domestic 46,187 cr , outside India 28,705 cr ;
25758 cr reserves ( 230 cr no of equity shares + retained earnings 25, 297 )
FY18 Q4 earning call
Rana driving call around 90% and rajit around 5%.
Yes bank guided credit cost for FY19 - 50 to 70 bps
I.e 1400 cr set aside of provision cost in operating profit .
Expect 30% loan growth and 25% profit growth in next few years - this year grown 54% in loan books
Raising capital - 10% equity dilution with $1 billion worth . Thru Perpetual and tier 1 bonds
What is cet1 ?
RBI divergences - RBI had audits in April, oct 2017 - who is the auditor ? If KPMG , then why he is not able to recognize ? What is Iraq rules of RBI ?
Vision - 5 trillion assets and 3 Trillion deposits by 2020
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Notes ( not more than 5 lines )
QIP - APR-2017 - 3.27 cr shares with 4906 cr worth ( $750 Million ) with 1500 per share - after split itās become 300 per share
Jul-26-2018 : Stock split - FV 10 to FV 2 - 1 share become 5 shares .
Sep-2016 scrapped $1 billion share sale - embarrassment to bank and blame game among participants
14 Likes
If the new CEO is an outsider and given a free hand, he would want to show a good growth record during his tenure, so he would go ahead and take losses upfront. An interesting article in this context -
Yes Bank wonāt remain in the NIFTY with itās fall in market cap. So put that as another downside trigger - the real rush to sell YB at institutional level will take place when the exit from NIFTY happens.
5 Likes
RBI may not give in to Rana Kapoor term extension request; move raises questions on the role of Yes Bank board
Experts say the boardās actions too should come under scrutiny at a time when the Reserve Bank of India is taking action against chiefs of private sector banks.
I didnāt understand what the point of asking for an extension was in the first place.
Created more uncertainty. Still the best thing for the bank is to move on from RKās leadership, select new leadership, clean up the books, declare NPAs/losses whatever, raise capital and herald in the new age of conservative growth. Thatās the best way forward for everyone.
Disc : Invested and added recently as well.
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Clarifications issued by the bank in response to NSE queries. They sound confident and claim of no wrongdoing g 
I donāt understand how this rumour mill has started and where itāll end but obviously it is causing a bleeding in the share price.
Our public institutions like RBI, NSE should know better than to publicly crucify an institution which is still performing well by the way, by fanning these rumors.
What evidence does NSE has for which it has raised the queries? And why now all of a sudden out of the blue?
And Iām quite surprised that the mgmt is mute too. As if it doesnāt matter to them whatās happening.
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