Looks like he was mis-quoted: Here is what he tweeted:
“I just heard my own interview for I was confused. I did not use the word massive. I said no fraud likely- different from saying massive fraud unlikely.”
Interview by Rajat Monga
Yesterday’s press release says "YES Bank’s analyst conference call, scheduled on October 01, 2018 at 4:00pm IST, can be heard at following link, post 10 pm:
The link doesn’t seem to be working though. Is anyone able to access it?
The management sounded positive about finding a successor by the end of January 2019. The suggested names are likely to be a combination of internal and external candidates.
The bank expects growth to come down optically in the second half of FY19 on a high base of last year. It is cognizant of its capital constraint and the challenges to its credit rating in case of failure to raise equity by the end of the current fiscal.
The management is open to the idea of selling down assets to bring down the requirement of capital but would nevertheless like to be a part of the exciting growth journey that lies ahead of most private banks. The outlook and strategy of the new CEO will definitely have a bearing on growth from FY20 and beyond.
YB has corrected more than 50%, but this is not the first time YB has suffered a heavy crash.
Historically, YB has been a volatile stock. In 2004 it was IPO at 45 then it reached 280 (approx.) in 2007 high before crashing to around 50 in 2008 (approx 80% crash from the peak). During this time, even though the stock was volatile, the business continued to do well.
Every time since inception, when YB faced the crisis, which seemed daunting at the time as an investor, the bank has come up stronger. I am not sure it will happen this time, but if I have to make some decision based on history, I would be more inclined to think that they will overcome- if not get stronger- the current crisis.
Here is some of the crisis
- During 2013, during the taper tantrum, the stock suffered heavy losses. The main cause was YB’s heavy reliance on wholesale funding. Today, the bank CASA deposit ratio is 35+, not the best, but more than double the level in 2013.
- YB suffered promoter tussle with late Ashok Kapoor family. The overhang lasted for a year, but eventually, the stock recovered and caught the valuation.
@Yogesh_s has done an excellent CAGR calculation above for some of the duration.
One thing different this time is Rana Kapor or uncertainty surrounding him, which nobody knows how the situation will play out.
Currently, a lot (I would say most if not all) negative are priced in- it includes all probable and possible scenario. YB has become a whipping boy for the media channel, and it is becoming a self-fulfilling prophecy in term of stock price.
Current Book value is around 110. Even if the YB declared all NPA, which RBI has pointed out in diverge, the book value might come down to 90 (approximately). However, if one listened to Rajat Monga Bloomberg interview where he explained some of the divergences, the situation is not as bad, but consider for argument sake that all divergent result in NPA. YB quarterly PAT is around 1000cr which adds around 5 to book value every quarter. I am not taking into account the next two quarterly profit in the calculation.
In a reasonable worst case the stock is trading at around PB of 2 with is not bad. In the short term, no one knows, how bad the situation can become, but over the medium term, if the business does not suffer as badly or NPA does not surge as the market is projecting, then it may turn out to be a reasonably good opportunity.
I always remind myself of a quote from a well-known investor “Market is a slave to numbers”. If the company delivers a good number, the stock will catch up with results sooner or later.
Note- I am invested, so views are biased.
My friend are you comparing March 17 GNPA with Sep 18 Loan book. Loan book is growing at ~ 50% YoY
Providing for the bad loans is only one part. Once an account is declared as an NPA, interest income recognition stops. If capital is eroded, Growth stops, RoAs drop. Balance sheet deleveraging begins.
If divergence was the only issue, RBI could have acted sooner. Who is to say that there isn’t any other issue with the Bank?
Disc- Yes Bank was my top holding at one time. Exited majority position at Rs 380
I believe if it would have any major issue wrt books / asset classification or significant issues/risk in that case RBI had alerted other bodies too and would not have just rejected the appointment of Rana Kapoor
Mr Monga has clarified this point very well in Bloomberg interview. YB is seeing once in a lifetime opportunity to get into the account which was difficult to get into for example key corporate house. He has also mentioned that a majority of the growth has happened in Q3/Q4 last year and current year growth is in line with other quarters. When it comes to lending, YB can always choose to reduce the growth rate or not grow aggressively after all it is their money. The fact that they are choosing to grow at such a high rate may be due to an opportunity to me. Or Am I missing something here?
Many market participants have doubts about YB’s NPA number and I think their doubts are proven by RBI’s action of cutting short RK’s tenure. NPA argument was true when the price was 400, then 300 and now when the price is around 200.
By the way congratulation for getting out in a timely manner.
I’ve seen Mr. Monga’s interview on Bloomberg and listened to him on the concall as well for the first time.
I must say I was not very impressed with the way he was responding. His style, his demeanor and poise.
To be sure he sounded confident that the bank can ride through this twin crisis (more on the call, than the interview). And maybe the details like RBI communication were really not with him.
But I didn’t find him ready enough to take up RK’s job. I just didn’t find him that much detail oriented or poignant in explaining the issues (his pitch basically).
Forgive me this opinion of mine is highly subjective and I am only thinking about this coz he’s being put forth in public interactions by the bank so clearly it means something.
And I continue to believe Yes Bank can sail through this crisis though it’ll take its own time to do this.
Till then, invested.
I do not see any “fixes” needed for Yes Bank in the article. Except that the author believes that growth may get a bit moderated.
The see-saw continues & Mr Market doesn’t like uncertainty
Imagine the level of bitterness between the 2 clans - both seem ready to let Yes Bank suffer while trying to ensure the other is brought down. In the process, they’re just hurting themselves & outside investors more!
Akhir main paisa bolega! (I hope!)