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MUMBAI: Shares in Yes bank have surged 17% this week since ET confirmed the appointment of Ravneet Gill as the Yes Bank CEO, ending months of uncertainty about the leadership succession at the private lender.
But the challenges of cleaning up the corporate lending book and improving corporate governance could cap further upside as investors would like to see his plans before buying more into the lender.
“Some uncertainties have reduced with the announcement of the new MD CEO who would be taking charge at the bank,” said Karthik Srinivasan, group head - financial sector ratings at rating company - ICRA.
“Updates on divergence, raising equity capital and the revised strategy of the bank would be the key monitorables from a rating perspective.”
Divergence is the difference between the Reserve Bank of India’s (RBI) inspection report and the lender’s own assessment.
In October 2017, Yes Bank had reported a divergence in gross bad loans of Rs 6,355 crore for the financial year.
There could be another divergence of about Rs 1,500 crore, market sources believe.
Gill, who now heads Deutsche Bank’s India operations, will take over as the CEO of the private sector lender on March 1.
“The appointment of Gill as the new MD CEO now puts to rest the uncertainty over the leadership and the RBI audit report on NPL divergence and capital raising are the next milestones to cross,” said Antique Broking in a report.
“The bank remains confident of containing credit cost at 80bps (which includes the impact of RBI divergences)…there could be a positive surprise.”
In the past few months, Yes Bank fell due to corporate governance concerns.
Several independent directors quit the board.
Rating company ICRA downgraded Yes Bank’s long-term credit rating on senior bonds by a notch to AA+ from AA in November 2018.
Yes Bank shares were up as much as 7% Friday but erased their gains as the broader Sensitive index fell nearly half a percent.
They closed at Rs 219.85, up 2.8%.
“One of the major challenges for the new CEO would be to find any hidden injury in the balance sheet, if at all.
If it is all-clear, he can focus more on corporate and retail banking,” said a senior executive at a rival bank.
