Yes bank

(JKS) #121

Somehow, all this back pedalling by various research houses on exposure etc has robbed the sheen off this superbly performing bank. The growth numbers are above ind average and the slow decrease in cost of money is commendable. Stock is struck in this 780-880 range forever and just slides or rises based on news or no news respectively. Add the pot boiler between kapoors, you have no shortage of dubious news!,
Disc. Invested. Views will be biased. Do your own research. This isn’t a buy/ sell reco

(Gyan Roy) #122

Yes, the company has done fantastic both on topline (42%) and bottomline (27%). What surprised me is the reduction in gross npa guidance from 60 - 80 basis point to 50 - 70 basis point after Q1 results.


Sorry to butt in here again! Be careful with Yes Bank nos. and take it with pinch of salt. Industry has been apprehensive and UBS brought out real facts. UBS had much worse things to say about Axis and ICICI but only Yes chose to respond. These guys are reporting eye popping nos. qtr after qtr which is being taken with great skepticism. I may be completely wrong here.

Disc: I have made 7x here and sold when Deccan Chronicle controversy broke out and these guys refused to recognize NPA.

(PP) #124

My understand was that every bank, including HDFC, Kotak, ICICI, Axis, had exposure to Deccan Chronicle.

What exactly was done wrong by Yes Bank - can you point me to some web-links on the subject?


I think it was in 2012 when it was clear that Deccan promoter had taken huge loan from multiple institutions by mortgaging same asset. I read somewhere that they lost everything in betting but can’t confirm that. Yes had security of the team which Yes could not have sold to recover. Every bank classified it as NPA except YES. Later they sold this 120cr exposure to ARC and recovered 54cr but never declared any spike in NPA. I just felt uncomfortable and sold it which was right decision in hindsight despite its performance. Even professor has written on it. Everyone has a view that these guys are very aggressive in accounting and hence market might not give proper multiple like Kotak or HDFC.

(PP) #126

Important to distinguish between…

(a) Management trying to hide some bad news
(b) Management playing tactical games to recover loans

In this case - quite clearly the management wasn’t trying to hide anything - because the outstanding exposure of Yes Bank (about Rs. 126 crores) was clearly known to the public, and was widely reported in the media (See this link…

The management didn’t classify the loan as NPA, because it hoped to do an early recall of the loan by making the claim that the loan agreement had been violated. Classifying it as NPA would have removed this possibility. This was merely a tactical game, and not any hiding/fudging of facts.

The bank/promoters is known for trying to grow aggressively. The general word in the industry is that the promoters want to grow the bank fast, and exit by M&A. I know at least a couple of banks who were approached by Yes Bank for a sale in the past (Note: This information is not in the public domain)…

I haven’t heard the criticism of Yes Bank’s accounting in the industry circles so far… But, will try talking to some people…

Disc. Invested


true about M&A but they have been denying it in public all along. Interestingly they also don’t acquire to keep everything ‘clean’.
Look, the real issue with Deccan was that mgmt. had gone bankrupt and Yes recalled loan only when the matter had gone in courts and everyone came to know about banks’ involvement. There is a technical definition of NPA and there is true spirit of accounting which required that they made adequate disclosure. It was clear that their security was non-tradable since BCCI was in favour of bank takeover. By recalling they tried to delay the recognition further and later sold it. No law was broken but as an investor I was not comfortable when it is supposed to be a trust institution.

(PP) #128

Assuming that what you say is true - it is a loss of 66 crores. Why would that lead to a spike in NPA, when the loan book size was around 55000 crores (in Dec 2012) - it will naturally only have a negligible impact.

However, the other question is whether Yes Bank actually lost 66 crores. Maybe not - because a part of the exposure was against securities (including some FD deposits lying with Yes Bank), and these securities might have been seized.


true the amount was small but the mgmt. gave a dull interview explaining how they do think this was not an NPA. This was real deal breaker for me when everyone had recognised. I had never heard this non-prudent bahviour about YES. I might have over reacted but aggressive accounting is no no for me. No doubt they have built a quality organisation…

(PP) #130

So, there were two broad option before the banks

(1) Allow the company to go into liquidation (this is what the Deccan promoters preferred)…
In this option, the liquidator would decide which bank/NBFC/others get what portion of the liquidation proceeds

(2) Banks try to seize and auction/resell the securities that were mortgaged to them… (Banks which had good mortgaged securities, preferred this option for obvious reasons - they get to recover maximum this way…)

Yes Bank (and some of the other banks too) didn’t want to classify as NPA, because that would have increased the chances of option (1) playing out…

Personally, I think the management deserves some credit for this… That was the prudent thing to do… if you think rationally…


Two red flags, one they took a cricket team as security which is not a reasonably liquid asset and can’t be considered prudent action. The loss in sale clearly demonstrates that since one could not have auctioned the team.

Second, they tried everything to delay the recognition which allowed them to show clean numbers when it was clear that it was non-recoverable. The matter was in various courts as there were multiple claims on the same asset. Sure, they wrote off losses from the reserve.
I am not saying that they were wrong but I think it important to be prudent and conservative for a bank management. I have also got comments like they behave like an investment bank rather a retail bank.

(PP) #132

Cricket team as security? Where did you get this from? Any web-links?

They lent to the company that owned the IPL team franchisee… IPL teams didn’t require any CAPEX investment - so these are working capital loans… The loan agreement said that Yes Bank had the first claim on all receivables of the IPL franchisee, which is as prudent as it gets…

I have analyzed one of the IPL teams (as part of an effort by the team owners to sell the team)… So, I know that their operating cash flows are good…

Who could have predicted that the IPL team would be terminated by BCCI? Can’t blame the management for such unpredictable matters…

(PP) #133

Any specifics on this? Have you asked these people what they really meant?

Yes Bank had a conscious strategy of attracting only big depositors (those who maintain deposits over Rs. 1 crore). They were not interested in the smaller depositors. In that sense they were not very retail oriented. They have diluted this strategy in recent times - with increasing focus on retail…

Would appreciate if you can add any colour to this…


Sorry, don’t have any links on this but they the way they take aggressive risks in financing promoters is avoided by Kotak and HDFC. I have heard that they are very active in promoter financing as this is a kind of secure business but a high yielding one.

The link below on IPL team as security and complications.

(PP) #135

Ok… Now I get where you are misunderstanding this…

So, the IPL franchisee earns some direct revenue (stadium ticket sales, in-stadia advertising, merchandising, team sponsorship, jersey sponsorship, etc) + some indirect revenue (broadcasting rights are sold by BCCI and then this is shared with the IPL franchisees)…

The major part of the revenue is the indirect revenue (I don’t want to share the breakup and other details, due to confidentiality issues)…

Yes Bank’s loan to Deccan Chargers had a first claim to this indirect revenue. Since BCCI terminated the IPL team and looks like BCCI refused to share the indirect revenue, Yes Bank threatened to seize the FD deposits of Deccan Chargers lying with the bank. This would have made it impossible for Deccan Chargers to pay the players…

So, the team/players were not the collateral… The indirect revenue from BCCI was the collateral… That is as safe a collateral as one can find - for the simple reason that broadcasting rights of IPL are highly valued, and sold for multi-year periods…

Of course, even the safest collateral can turn out be uncertain - like in this case, when the IPL team itself was terminated… But this is clearly not a case of management incompetency…

(PP) #136

This needs more digging in… Any promoters you can mention who are financed by Yes Bank? Are these good promoters OR bad promoters? E.g. Vijay Mallya OR Tatas?

The other concern is of course, promoter in-fighting… This has been going on for 7 long years - that is really loooooong!


exactly they have financed Mallya but with security and even JP Associates in the current environment. Look, anybody following IPL will concede that there was no revenue model for IPL franchisee from day 1. It has been a close group betting syndicate was clear to everyone smart enough.

(PP) #138

Any web-links to share on this?

In banking, details matter…

What is the size of exposure? Is it a large exposure?
What is the quality of collateral?
Was it to Mallya in his personal capacity? Or was it to one of the companies that he is associated with?

As far as I know, the 17 banks who had exposure to Kingfisher did not include Yes Bank… Please don’t make such false statement without any evidence to back it up…

Any banks you know who have absolutely no exposure to Mallyas, Jaypees, Deccan Chronicle, Sahara, Bhushan, etc etc… You wont find one… HDFC, ICICI, Axis, Kotak, IndusIndi, SBI, PNB all have some or the other exposure to most of these promoter groups…

Now you are kidding :smile:

Just search on Google for IPL broadcasting rights, ticket sales, merchandise, sponsorship rights, etc… You will get the picture…

Always prefer to debate something if the other party is bringing any facts/evidences on board… instead of throwing prejudices/falsehoods… I call it quits - not debating with you anymore :wink:


well, my first comment itself was about intangibles of the Yes bank’s business. Involvement with many shady promoters speaks volume about it. I had no stake here anyway. Sure, let’s close it.

(Nikhil Rodrigues) #140

@PP1 : I was Yes Bank investor from 2010 to 2014 and tracked it very closely. Yes bank had exposure of around 120-140 Cr to Kingfisher. Most of it was written off and some was recovered. This has been mentioned in multiple Yes Bank con calls during that time.

They also had exposure to Suzlon but that one didn’t turn into NPA. Yes bank is very aggressive in lending business than HDFC and Kotak bank hence the market perception of it being risky. As someone who has tracked YB for last 20+ quarters and read every report/concall/article available on it, I can say that bank is indeed aggressive and does take risk. They manage to get good collateral though. It’s investors choice whether to stick with risky lender or look at other options. I opted out after making 2.5 times.