CATEGORY: Consistent Performer; Quality of Assets (Large bank)
From early 2004, when YES Bank kicked off its operations, until 2010, the new generation private sector lender focused on innovative strategies to survive and grow while keeping costs under control. The bank's version 1.0 took its balance sheet size from zero to more than Rs 36,000 crore. During this period the bank also emerged relatively unscathed from the post-2008 global financial crisis that was triggered by the bankruptcy of US investment bank Lehman Brothers.
In version 2.0, from April 2010 onwards, YES Bank focused on scaling up operations gradually with a focus on retail banking. Consequently, its number of branches has swelled from 150 to about 600 spread across the country. Its ATM network has grown from 244 to1,200. The current balance sheet size is over Rs 1,00,000 crore. Rana Kapoor, one of the two founders and also the CEO of the bank, is now gearing up for version 3.0. "As we enter version 3.0, we will be the smallest large private sector bank. Naturally, our aspiration is to evolve as one of the medium-to-large private sector banks by March 2020," says the 57-year-old Kapoor.
If the past is any indicator of the future, it is entirely possible for Kapoor to spring a surprise. In the BT-KPMG Best Banks study, Yes Bank has managed to find a place in the large banks category. It is ranked fifth - only HDFC Bank, ICICI Bank, Axis Bank and Bank of Baroda are ahead of it in terms of growth, strength and size. The Mumbai-headquartered bank is the most consistent performer in the last five years and also a winner in the quality of assets category.
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Unlike its peer Kotak Mahindra Bank, which recently acquired ING Vysya Bank, Yes Bank so far is a pure organic play with a focus on banking. The bank has not diversified into other business categories such as insurance, mutual funds and private equity. "It may seem like being fashionable to do mergers and acquisitions (M&As) but sometimes when cultures mismatch it can be a bitter experience," says Kapoor.
Yes Bank's retail portfolio is 17 to 18 per cent of the total business. 'Today, 70 per cent of our human resources are deployed in retail sales and services. Yes Bank as a retail brand itself is beginning to resonate," says Kapoor. The bank offers a complete suite of retail products, including mortgages (in alliance with DHFL, a housing finance company), credit cards (with American Express) and consumer loans, small and medium enterprise (SME) loans and micro SME loans.
Kapoor expects the bank's retail foray to be its single largest business by 2020. "We expect retail on the loan side to be roughly about 40 per cent including SME. On the liabilities side, retail deposits should be 60 to 65 per cent by the time we end version 3.0," says Kapoor, who plans to introduce Yes Bank's own credit cards soon.
Kapoor is not unduly perturbed about the growing competition from other banks. "The demanding years of our lifecycle are substantially over," he says. "We are at the inflection point. So, we are making the transition from a medium bank to a large bank."