YES to spin off investment bank unit

MUMBAI: Private sector lender Yes Bank plans to hive off its investment banking business into a separate subsidiary latest by the year to March 2009, a top official said on Wednesday.

“We can even do it before that though it will not be until we build up scale and our track record,” the bank’s founder and CEO, Rana Kapoor told Reuters.

YES Bank also plans to set up a $100 million private equity fund this year.The bank plans to build a niche for itself in the investment banking space by focussing on companies in the knowlege economy and emerging corporates keen on fund raising and acquisition, he said. “We also want to build a niche in outbound M&A,” he said.

Indian investment banking revenue rose 23% to $413 million last year, according to market data firm Dealogic.

“We are doing big deals in investment banking and this (spinning the unit off) is the best way to attract better investors. Independent businesses make more sense.

IPOs, buy-back and capital market business can be dealt separately under merchant banking, while private equity, M&As, which will be a part of investment banking can be dealt separately,” said Rajat Monga, CFO with YES Bank.

The bank is also looking forward to have a separate microfinance business. “By having a different business strategy, we can acquire more funds for this particular segment and have different technologies and sales force in place catering just for them,” Monga added.

The bank posted a 113% rise in its April-June net profit boosted by growth in its fee income, which constituted about 59% of its total income excluding interest expenses. Net profit rose to Rs 36 crore from Rs 16.88 crore. Interest and non-interest income combined more than doubled to Rs 348 crore from Rs 129 crore. Non-interest income also doubled to Rs 75.96 crore. The bank also saw 118% credit growth to Rs 6,917 crore.

“We try to ensure our non-interest fee income to be in excess of 50%,” he said adding growth in fee income came from its advisory business, third-party product distribution and treasury.

The bank also saw 118% credit growth to Rs 6,917 crore. “The growth in agricultural loans has been fairly promising along with those in capital goods, infrastructure and life sciences sectors.”

Kapoor also said the bank has been in ‘’active discussion’’ with financial investors abroad to raise up to $120 million by diluting 6.7% stake either through private placement of shares or through qualified institutional placement.

YES Bank shares ended 0.25% higher at Rs 181.80 in the Mumbai market. YES Bank hopes to grow by 85-95% during the year.