Is 2020 a Good Year to Invest in Yes Bank Shares?
The year 2020 presents a unique proposition for investors considering the Yes Bank share as a potential investment. Given the fluctuating economic landscape due to global events, particularly the NPA (Non-Performing Assets) scandal and the ongoing legal proceedings, investing in Yes Bank may seem risky. However, the outlook for this bank remains optimistic for those who understand its strategic positioning and future plans.
Why Invest in Yes Bank?
Several factors make Yes Bank an appealing investment prospect:
1. Technological Prowess and IT Systems
Yes Bank has established itself as a leader in embracing technology in the banking sector. With robust IT systems, it offers a comprehensive range of banking products, including trade finance, lending, reconciliation services, and treasury functions. This tech-savvy approach has positioned the bank as a market leader in digital and UPI (Unified Payments Interface) services, which are critical in today’s digital-first market. Additionally, the bank’s internet banking services are tops for both individuals and SMEs (Small and Medium Enterprises), providing a broad suite of financial services.
2. NPA Scandal Resolution
An unresolved scandal involving non-performing assets (NPAs) and accusations of bribery have clouded Yes Bank’s image. However, a resolution is now in sight. By March 2022, the bank is expected to transfer its NPA accounts to a new Asset Reconstruction Company (ARC), which will manage these assets. The bank will benefit from this move as it will no longer need to deal with the daily challenges associated with NPA management. This transition is set to improve the bank’s financial health, leading to better performance metrics and improved credit ratings.
3. Improving CASA Deposits
Customer Account Savings Account (CASA) deposits have seen a positive trend, a development that indicates customer confidence is returning. Clients who withdrew funds during the bank’s reconstruction phase are now augmenting their deposits back to Yes Bank. This trend reflects a customer service advantage, as Yes Bank provides superior customer support compared to other banks, especially public sector banks. This service-oriented mentality is a silent strength for the bank and signals a growing customer base.
4. Strong Leadership
Under the command of Prashant Kumar, MD/CEO of Yes Bank, the bank has shown remarkable determination and seriousness in addressing the challenges. Kumar's leadership is marked by a clear vision and a strong commitment to resolving the bank's past issues. His proactive approach in resolving fraud allegations and ensuring that those responsible are held accountable instills confidence among the bank's stakeholders.
5. Employee Commitment
The employees of Yes Bank are deeply committed and have a strong desire to see the bank thrive once again. This dedication creates a robust and resilient workforce, capable of delivering exceptional results. The collective drive and passion for success injects a sense of urgency and purpose into the bank's operations, driving its recovery and growth.
6. Government Support and Historical Precedent
Historically, when faced with financial scandals, the Government of India (GOI) has stepped in to support and facilitate a turnaround for banks in need. In the case of Yes Bank, there is a strong backing from the GOI, which is likely to aid in stabilizing the bank's operations. Moreover, parallels can be drawn with the Satyam Computer scandal, where Ramalinga Raju's misdeeds led to the formation of Tech Mahindra. While it took some time for Tech Mahindra to fully recover, the stockholders ultimately reaped significant rewards. The same trajectory can be expected for Yes Bank if the government support and internal reforms are effective.
Conclusion
The current position of Yes Bank is somewhat analogous to that of Satyam Computer, a company that faced similar challenges but eventually saw a resurgence with the right leadership and government support. By purchasing Yes Bank shares at the current price point and holding them for a minimum of 3 to 5 years, investors could potentially see substantial returns as the bank regains its footing and grows its market share.
Investment Strategy: Pick Yes Bank @13/- and hold for at least 3 to 5 years.