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May 6, 2024

YES Bank Aims to Bolster Margins by Slashing Retail Loan Growth, Says MD & CEO Prashant Kumar

In a strategic move aimed at enhancing margins, YES Bank, under the leadership of Managing Director and Chief Executive Officer Prashant Kumar, is gearing up to reduce its retail loan growth despite the prevailing trend among lenders to expand their retail loan portfolios. In an exclusive interview with Manojit Saha, Kumar elaborated on the bank’s plans, highlighting the impending improvement in its core capital following the conversion of warrants into equity by investors Carlyle Group and Advent International.

Kumar emphasized that the decision to curtail retail loan growth is part of a larger strategy to strengthen YES Bank’s financial position and profitability. While many banks are aggressively pursuing retail lending to diversify their asset base and mitigate risks, YES Bank’s approach is focused on optimizing margins and ensuring sustainable growth.

The move comes at a critical juncture for the bank, which has been on a path to recovery following a tumultuous period marked by a crisis in 2020. By scaling back retail loan growth, YES Bank aims to allocate resources more efficiently and prioritize segments that offer higher returns. Kumar emphasized that this strategic shift aligns with the bank’s long-term vision of achieving robust financial health and resilience in the face of market fluctuations.

One of the key drivers behind YES Bank’s confidence in implementing this strategy is the anticipated improvement in its core capital. With Carlyle Group and Advent International set to convert warrants into equity, the bank expects a significant boost to its capital base, providing greater flexibility in managing its loan portfolio and supporting growth initiatives.

Kumar highlighted that while retail lending has its merits, including diversification and steady cash flows, it also poses certain challenges, particularly in a volatile economic environment. By moderating retail loan growth, YES Bank aims to mitigate risks associated with consumer credit and optimize its asset mix to enhance overall profitability.

The decision reflects a prudent approach to balance sheet management, with YES Bank focusing on quality over quantity in its lending activities. Kumar stressed the importance of maintaining a disciplined credit risk assessment framework and ensuring that loan growth is in line with the bank’s risk appetite and capital adequacy.

Moreover, the move to reduce retail loan growth does not imply a complete withdrawal from this segment. YES Bank remains committed to serving retail customers and meeting their financing needs but intends to do so in a more selective manner, prioritizing segments with higher margins and lower credit risk.

In the competitive landscape of the banking sector, where margins are under pressure due to various factors including regulatory changes and market dynamics, YES Bank’s strategic pivot underscores its commitment to sustainable profitability and shareholder value creation. Kumar reiterated that the bank’s overarching goal is to strike a balance between growth and risk management while delivering value to all stakeholders.

Looking ahead, YES Bank is optimistic about its prospects, buoyed by the strengthening of its capital base and a more focused approach to lending. By recalibrating its retail loan growth strategy, the bank aims to consolidate its position in the market and emerge as a resilient and profitable player in the banking sector.

In conclusion, YES Bank’s decision to trim retail loan growth underscores its proactive approach to enhance margins and fortify its financial position. With a sharpened focus on risk management and capital optimization, the bank is poised to navigate challenges effectively and capitalize on growth opportunities in the evolving banking landscape.

Jhumpa Lahiri

Jhumpa Lahiri

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