Dubai: Yes Bank, India’s fourth biggest private lender, plans to raise $400-$500 million through a medium-term note issue, following its entry in the UAE, a top official said.
The bank, which has been invited by the Dubai International Financial Centre (DIFC) to start operations, is awaiting the Reserve Bank of India’s approval to open its first overseas branch outside the country.
“We expect to start operations in the UAE within this year,” Dr. Rana Kapoor, Managing Director and Chief Executive Officer of Yes Bank, told Gulf News. “Following this, we would like to raise funds between $400 million to $500 million through a medium term note issue that will support businesses in the region.”
The bank is also planning to attract more investors from the GCC to invest in the bank. “We would be happy to see more investors from the UAE and the GCC invest with us,” he said.
The bank currently handles $40 million to $50 million worth of remittances per month from the UAE —through the various remittance houses in the UAE.
“More than $7 billion funds are remitted from the UAE to India every year. We want to increase our share and our presence in this market will help us strengthen it,” Kapoor said.
Established in 2004, Yes Bank currently operates through 425 branches and 750 automated teller machines (ATMs) with 6,500 professionals. By March 2015, the bank’s strategy is to more than double its operations and expand to 900 branches, 2,000 ATMs and 12,750 people.
He said, his bank’s entry in the UAE market is part of a wider strategy to expand in the international markets. “Through our presence in the UAE, we plan to serve the Middle East, African markets and beyond,” he said.
“Besides, the UAE is a growth story. A 5 per cent economic growth is possible this year in the UAE and we want to become part of this upswing.”
The bank has a strong trade portfolio of $3.2 billion. “The India-UAE trade has crossed $70 billion last year and it will grow further. We want to support this growth by becoming more involved in trade finance,” he said. “So, the opportunities are huge and we want to tap them.”
The bank has an asset base of Rs150 billion, loans worth Rs100 billion and Rs125 billion in deposits. The bank is 26 per cent owned by Dr Kapoor and his family while 47 per cent is owned by foreign shareholders.
“By May this year, we will cross 500 branches. Our plan is to grow organically,“ Kapoor says.
Currently, the bank’s balance sheet is growing between 30-35 per cent year-on-year. “Our target is to achieve a 35 per cent year-on-year growth between 2011-2015,” he said.
However, this growth rate might be difficult to sustain for a longer period, as Indian economy is facing the slowest growth rate in a decade – touching 5.3 per cent.
Credit rating agency Moody’s last month said the outlook of the Indian banking system for the next 12-18 months remains negative.
Kapoor, however, remains optimistic.
“The India story is good for at least 2050 — and it will continue to grow with slight bumps on the road,” he said.
However, the Indian government provides strong ongoing support in the form of annual equity infusions for the public sector banks, and all banks are mandated to meet loan quotas for certain sectors of the economy. The government on Friday (January 11, 2013) approved a proposal to inject Rs125 billion in public sector banks to help them enhance the lending activity and meet the capital adequacy norms.
“On the positive side, one anchor of stability for Indian banks is their strong business franchises, which support their low-cost funding profiles, helping them maintain sizeable lending margins to sustain pre-provision earnings,” says Gupta.
Reserve Bank of India predicts growth will continue to be below the country’s potential.
“Growth in 2012-13 is expected to stay below trend at around the previous year’s level of 6.5 per cent. Growth outlook remains weak as factors that slowed down growth in the previous year persist and show no signs of getting resolved,” RBI said in its annual report in August.
