What’s up with YES BANK? – A complete overview

Why did YES BANK fall? What happened to YES BANK? What’s up with YES Bank? Why did the price fall? Was there a scam? These are the questions going round and round your head and hence here is the answer to all your questions.

This article might be long but I suggest to read it or skip questions (in bold) to look out for what you are searching for.

Before getting started, here is the timeline with exact dates and news on when the roots for the fall sprouted and when did fall start – CLICK HERE

CONTEXT –

1. #Flashback
2. Where did YES Bank start? #FactCheck
3. What happened next?
4. Did you know?
5. What next?

“It may be unfair, but what happens in a few days, sometimes even a single day can change the course of a whole lifetime.” – Khaled Hosseini

This quote is as relevant as yes bank situation which went crashing down in just a matter of days.

#Flashback – YES BANK –

August 2018 – INR 400 (Highest)

August 2019 – INR 71.20

October 2019 – INR 32 – (Lowest)

January 15, 2019 – INR 203

January 15, 2020 – INR 40.45

So, in a matter of a year, Yes Bank share price hit the highest and the lowest with a huge downside on its part.

Where did YES Bank start? #FactCheck

Yes Bank is an Indian Private Sector bank and was founded in 2004 by Rana Kapoor and Ashok Kapur operating as a corporate bank with asset management and retail banking as subsidiary function. In May 2005, Yes Bank got listed in Indian stock exchange at an issue price of INR 45.

In 2011, Yes Bank received an award of “India’s Fastest Growing Bank of the Year” at Bloomberg UTV Financial Leadership Awards.

In 2015, The Banker London recognised and awarded Yes Bank as “The Bank of the Year”

As of 2018, there are 18,240 employees in Yes Bank.

Why have so many people invested in Yes bank share?

Back in 2016, if your portfolio did not have investment in Yes Bank equity, your portfolio was considered weak or below potential. This was how powerful and in-hype Yes Bank was.

People trusted the founder and were happy with the where-about of Mr. Rana Kapoor.

Plus, if this private bank was one of the fastest growing banks in India, it is no wonder that people held utmost faith in them.

So how did Yes bank became a pain in the holder’s portfolio in a matter of 2 years? Was there a scam?

Well, it was all about some serious compliance & statutory failure and the after-math that followed.

In April 2018, Reserve Bank of India (RBI) raised serious concerns of Corporate Governance where it was observed that there were some persistent governance and compliance failure reflected by the bank’s highly irregular credit management practices along with a poor compliance culture.

This on being a part of India’s largest private bank seems highly discouraging and dangerous.

RBI said, “The serious lapses in the functioning of and governance in the bank and, in particular, the poor compliance culture, other serious violations of statutory and regulatory guidelines during the past three financial years, notwithstanding the subsequent corrective actions stated to have been initiated by the bank, reinforce our grave concern and regulatory discomfort with the role of the incumbent MD & CEO in the governance, management and superintendence of the affairs of the bank.

That was that. The scam, the hiding of information or the false truth, whatever you call it. It was a nerve-wracking week for investors of Yes Bank.

Customers were happy and the man leading the bank, Rana Kapoor could do no wrong. Until that is, the RBI refused to let him continue as CEO and that was when the company’s stock price started tumbling.  Investors couldn’t figure out why he was being ousted. This costed Yes Bank lose 22,000 Crores in a single day of trading, ultimately eroding investor’s confidence further and Yes Bank continued to take a beating in the markets.

What happened next?

On 17th September 2018, RBI asked the MD – Rana Kapoor of Yes Bank to end his tenure executing 31st January, 2019. “RBI has been very critical of the functioning of Mr. Kapoor and Yes Bank,” a person aware of the central bank’s adverse views said on condition of anonymity.

DID YOU KNOW – Rana Kapoor’s exit marked as the 3rd exit of a private bank’s CEO.

In 2018, The CEO of Axis Bank, Shikha Sharma’s term was reduced after the RBI said it had underestimated bad loans on its books and so was the case with Yes Bank.

ICICI Bank’s Chanda Kochhar quit (October 2018) over accusations of conflict of interest regarding loans to the Videocon Group.

Yes Bank had about INR 2.23 trillion in deposits and had extended loans and advances of up to INR 2.40 trillion as of September-end, 2018.

The RBI’s decision added clarity about Yes Bank, which ended at Rs 232 on the BSE, the most it has fallen since September 28, when it dropped 9.6%. 

Post this, the board collectively decided to claw back Kapoor’s bonuses for the previous two years ending 31st March 2016. Nor would they be paying any bonuses for fiscals 2016-17 and 2017-18 and did not propose any bonus for the following year.

What next?

The investors and potential investors, infact even the ones who never invested their money were eagerly waiting for Yes Bank’s quarter 2 results. However, no one held a positive expectation with the bank after it fell and tumbled to an extent that no one thought of. And as anticipated, the results were worse than what people expected them to be.

Banks usually work with a backup just incase they face such a critical and groundbreaking situation but all ties were lost when people realised that the backup did not really exist to build up the normalcy of actions again.

This was when NBFC crises hit our economy in 2018 where one after the another, NBFCs started defaulting leaving behind a long negative Dominique effect.

It is hard to interpret the future of Yes Bank. With rapidly eroding trust, deposits took a hit as well which left them with one final alternative -selling off a part of the company and so did they. But they are yet far away from the safe grounds.

Can you see a future for Yes Bank? Will the bank rise from the ground, again like a skyscraper?

– Kinjal Parekh