Meet The New Yes Bank CEO: A Corporate Banker With An Eye For Retail

When Rana Kapoor exits as chief executive officer of Yes Bank Ltd. at the end of this month, he will hand over the reins of the bank he co-founded to a fellow veteran banker Ravneet Gill, who currently heads Deutsche Bank in India.

At one time, Kapoor and Gill were both part of the foreign banking fraternity. Kapoor branched out to set up Yes Bank in 2003. Gill built a long career at Deutsche Bank and was appointed head of its India operations in 2012. He will step down from that post to take over as Yes Bank CEO by March 1, 2019.

Regulatory approvals are in place and indications are both promoters of the bank will support the appointment. If the stock market reaction is anything to go by — the stock surged as much as 19 percent following the announcement — then investors seem to support the appointment too.

“The advantage of an external candidate is that they bring a fresh perspective. The external candidate will not hesitate to revisit the processes and even some decisions,” said Amit Tandon, founder and managing director, IIAS.

While this removes the uncertainty, we will have to wait for Ravneet Gill to demonstrate his credibility and independence in due course of time, said Suresh Ganapathy, head of financial services research at Macquarie Securities.

The Deutsche Bank Story

While he is an outsider in Yes Bank, Gill is not new to challenging leadership roles. He succeeded Gunit Chadha as the CEO for Deutsche Bank India at a time when foreign banks were still grappling with the fallout of the global financial crisis. Gill also had big shoes to fill because Chadha had been widely credited with expanding Deutsche Bank’s operations in India, which eventually earned him the position of CEO of the Asia-Pacific business at Deutsche Bank and a place on the global group executive committee of the German lender.

Gill managed to keep Deutsche Bank’s India business stable through a period of significant turmoil. After the financial crisis, in 2015, the bank was caught in the midst of a global investigation for manipulating the London Interbank Offered Rate and was forced to pay a $2.5 billion fine. The scandal saw the exit of Deutsche Bank’s global leadership and a change in strategy towards growing its business.

But the lender did not have much reason to worry about in its India business, which, under Gill, remained profitable.

As of March 2018, Deutsche Bank India reported a net profit of Rs 910 crore as compared with Rs 986 crore a year ago. According to the Basel-III disclosures made by the bank, its total fund-based exposure as on June 2018 stood at over Rs 47,000 crore, while its non-fund based exposure stood at over Rs 53,000 crore. Engineering, metals and infrastructure loans dominated these exposures, the disclosures said. Bad loans for the bank are contained at under 1 percent.

The bank’s successes in India’s difficult transaction banking business have helped Gill grow his reputation as a strong banker. According to a senior official at Yes Bank, who spoke on condition of anonymity, Gill’s experience in transaction banking will be a big positive for the private sector lender.

A second person close to Gill said that Yes Bank will benefit tremendously from his governance-oriented, risk management focussed approach to banking. The one thing that Gill could probably improve upon is his engagement with clients, this person said while speaking on condition of anonymity.

“For Deutsche Bank, corporate banking formed 75 percent of loans and the majority of profit, and it had a strong presence in debt/capital markets,” CLSA pointed out in a report. “Hence, this appointment reflects Yes Bank’s focus on its corporate banking platform, unlike ICICI and Axis where the new CEOs have spent a longer time in retail businesses, albeit outside banking.”

The Retail Debacle

In 2014, Deutsche Bank, under Gill, decided to focus more on retail banking in India. In an interview with Mint newspaper then, Gill said that he wanted the bank to focus on India’s low risk housing finance business. He also wanted to expand lending to small businesses, even though it had a modest presence of 18 branches in India.

The strategy worked for a while. Then, bad news started cropping up. As of March 2018, Deutsche Bank India’s non-priority sector housing finance business had a loan book of over Rs 8,700 crore, with a gross non-performing asset (NPA) ratio of nearly 3 percent. In March 2015, the comparative numbers stood at Rs 1,966 crore and 1.08 percent.

Within four years of the decision to focus on retail, Deutsche Bank decided to put its retail lending business up for sale. The sale was later called off.

Yes Bank could become the platform from which Gill realises his retail lending ambitions.

The new age private sector bank’s retail lending portfolio contributed to 15.2 percent of total loans. Its micro, small and medium enterprises businesses currently contributes about 17 percent of total advances. The bank has been trying to grow its retail lending franchise to match the large share of retail liabilities it has garnered over the last nine years through higher savings interest rates. Yes Bank’s current account savings account ratio has risen to 33.3 percent by December 2018, from 10.3 percent in March 2011.

Churn At Private Banks

Gill is not the only new entrant to the top ranks across India’s private banks.

Axis Bank appointed Amitabh Chaudhry as its MD and CEO last year. He took over earlier this month after Shikha Sharma stepped down in December. Sandeep Bakshi took over as the chief of ICICI Bank after Chanda Kochhar stepped down from her position in October 2018, following allegations of quid pro quo for the Videocon Group.

The new leaders have a tough task ahead — convincing investors that the years of imprudent lending and weak compliance culture across these banks is now over.