Yes Bank and Shinsei in Cross

8/8/2019 Yes Bank and Shinsei in Cross

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Yes Bank and Shinsei in cross-border M&A

advisory pact

Introduction

In November 24th, 2010 private sector lender Yes Bank and Shinsei Bank of Japan

have entered into a strategic tie-up to offer advice in cross-border negotiations.

The major objective behind this merger and acquisition is to advise companies on

cross-border deals between the two nations India and Japan. The alliance will play

an active role towards further augmenting investment flows into the Indo-Japanese

corridor. The tie-up would enable both banks to leverage their combined expertise, stronglocal knowledge and excellent corporate relationships to jointly pursue mergers & acquisitions

(M&As), joint ventures (JVs) and merchant banking opportunities.

YES Bank Managing Director and CEO, Rana Kapoor, said, This alliance reinforces our

commitment towards the Indo-Japanese business corridor and demonstrates the trust that we

have been able to build, grow and sustain in our relationship with leading financial institutions

worldwide

Kapoor further added. This alliance will enable us to further enhance our investment bankingservices and facilitate overall bilateral cooperation through strategic interventions.

Shinsei is a diversified Japanese financial institution providing a full range of financial products

and services to both institutional and individual customers. The bank has total assets of $125.4

billion on a consolidated basis as of September.

Shinsei Bank President and CEO, Shigeki Toma, said, Over the past two years, we have

developed strong collaborative relationships with Indian financial institutions and especially

with YES Bank, in the domain of Japan-India cross-border M&As.

As Japanese companies have stepped up their India operations in recent years, we have signedthis business alliance to expand the range of services we provide to our customers through

stronger collaboration with YES Bank, Toma added.


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Background

YES BANK, India's new age private sector Bank, is the outcome of the professional &

entrepreneurial commitment of its Founder, Rana Kapoor and its top management team, toestablish a high quality, customer centric, service driven, private Indian Bank catering to thefuture businesses of India. YES BANK has adopted international best practices, the higheststandards of service quality and operational excellence, and offers comprehensive banking andfinancial solutions to all its valued customers.

YES BANK has a knowledge driven approach to banking, and a superior customer experiencefor its retail, corporate and emerging corporate banking clients. YES Bank is steadily evolvingas the Professionals Bank of India with the long term mission of "Building the Best QualityBank of the World in India".

Yes Bank was awarded the Most Innovative Bank in India at the New Economy

First Annual Banking and Finance Awards 2008. It was also awarded the Most

Sustainable Bank, India award at The New Economy Sustainable Banking Awards

2009.

Despite of the economic crisis that had already permeated across most industries and at

different levels., YES BANK has continued its steady growth trajectory through a robust

performance, effective execution management,

Yes Bank had aa hefty 58 per cent rise in net profit for the quarter to September atover Rs. 176 crore on the back of a healthy 78 per cent surge in net interestThe city-based lender also reported a 57 per cent growth in its profit for the firsthalf at Rs. 332.6 crore.

"Yes Bank has once again delivered a robust financial performance with recordprofit of Rs. 176.3 crore. This has been achieved on the back of sustainable netinterest income growth of 77.9 per cent and growth in advances of 86.3 per centyear-on-year," bank founder, MD and CEO Rana Kapoor said.

Kapoor said bulk (69.8 per cent) of the bank's business still depends on corporateand institutional banking, followed by commercial banking at 19.6 and branch

banking at 10.6 per

On half-yearly basis, net profit rose 57.1 per cent to Rs. 332.6 croreagainst Rs. 211.8 crore, net interest income jumped 72.8 per cent to Rs. 575.3


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crore against Rs. 332.9 crore in H1 FY10, while non-interest income came downto Rs. 274.8 crore from Rs. 287.6 crore.From the balance sheet given below we can readily compare the financialimprovements of Yes Bank in financial years 2009 and 2010.

BALANCE SHEET AS AT MARCH 31, 20 09/10Schedule As atMarch 31, 2010As at

LIABILITIES FY2009 FY2010 ASSETS FY2009FY2010

Capital 13396673 2969789 Cash andbalances

with Reserve

Bank of India

619953099 12777184

Reserves

and surplus

227498830 13272371 Balances

with banks,

money at

call and

short

notice

76779384 6449862

Deposits 3267985666

161694215 Investments

8102,099,41

3

71,170,194

Borrowings 447490761 37016770 Advances 9

221,931,23

2

124,030,92

2

Other

liabilities

and

provisions

517453177 14054756 Fixed

assets

10

1,154,664

1,311,148

Other

assets

11

11,907,315

13,268,591

TOTAL 363825107 229007901 TOTAL 363825107 229007901


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Shinsei Bank is a leading diversified Japanese financial institution providing a full

range of financial products and services to both institutional and individual

customers. The Bank has total assets of 10.4 trillion yen (US$125.4 billion) on a

consolidated basis (as of September 2010) and a network of 42 outlets that

includes 30 branches and 12 annexes in Japan. Shinsei Bank demands

uncompromising levels of integrity and transparency in all its activities to earn the

trust of customers, staff and shareholders. The Bank is committed to deliveringlong-term profit growth and increasing value for all its stakeholders.

Shinsei Bank is the successor of a trust bank, the Long-Term Credit Bank of

Japan, which had a government monopoly on the issuance of many long-term

debt securities. Following the collapse of the Japanese asset price bubble in 1989,

the bank was riddled with bad debts: the government nationalized it in 1998, and it

was delisted from the Tokyo Stock Exchange. After several proposed mergers

with domestic banks, LTCB was sold to an international group led by US-

based Ripplewood Holdings in March 2000 for 121 billion, the first time inhistory that a Japanese bank came under foreign control.

LTCB was relaunched as "Shinsei Bank" (literally "Newborn" or "New Life"

Bank) in June 2000, with new management and services.

Shinsei in India

Shinsei AMC in India was Shinsei Banks first venture into the asset management

business outside Japan. The other shareholders in the firm are billionaire investor

Rakesh Jhunjhunwala with a 15% stake and Shinsei Banks country manager

Sanjay Sachdev with a 10% stake. Shinsei AMC had launched its first equity fund

in India, Shinsei Industry Leaders Fund, in July 2009.
http://en.wikipedia.org/wiki/Long-Term_Credit_Bank_of_Japanhttp://en.wikipedia.org/wiki/Long-Term_Credit_Bank_of_Japanhttp://en.wikipedia.org/wiki/Japanese_asset_price_bubblehttp://en.wikipedia.org/wiki/Tokyo_Stock_Exchangehttp://en.wikipedia.org/wiki/Ripplewood_Holdingshttp://en.wikipedia.org/wiki/Japanese_asset_price_bubblehttp://en.wikipedia.org/wiki/Tokyo_Stock_Exchangehttp://en.wikipedia.org/wiki/Ripplewood_Holdingshttp://en.wikipedia.org/wiki/Long-Term_Credit_Bank_of_Japanhttp://en.wikipedia.org/wiki/Long-Term_Credit_Bank_of_Japan


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Afterwards there were lots of problems creeping in for Shinsei AMC in India and

the major ones were from its home country. It tried to make many more tie-ups

with different other indigenous banks like Andhra Bank, SBI MFs, etc but the

proposals were ultimately banished because of low prosperity of Shinsei in India

and the problems creeping in from its native place Japan.

On March 29, 2010 Daiwa Securities Group Inc and Daiwa Asset managementCo Ltd, jointly Daiwa Securities Group of Japan announced that the group wasacquiring the entire stake in Shinsei Asset Management (India) Private Ltd(SAMI) from Shinse Bank Ltd of Japan and other shareholders.

SAMI and Shinsei Trustee Company (India) Pvt Ltd (STC) will now become 100per cent subsidiaries of Daiwa Securities Group, subject to necessary approvalsfrom local regulatory authorities.

SAMI, headquartered in Mumbai, has been carrying on asset managementbusiness in the country since its incorporation in 2007 as an affiliate of ShinseiBank, and STC. SAMI has four branches in the country. It has entered into anumber of distribution contracts with banks, securities companies, financialinstitutions and IFAs. STC, as a trustee, monitors the management company and

protects interests and rights of investors.

The clear picture of Shinsei Bank can be sorted out from its income-statementsover the years. Rather it reflects how well the bank has performed as per its netincome is concerned from financial year 2007-2010

References:

http://www.hindustantimes.com/Yes-Bank-Shinsei-in-cross-border-M-amp-A-

advisory-pact/Article1-630573.aspx

http://www.business-standard.com/india/news/yes-bank-inks-pactshinsei-bank-for-

mergersacquisitions/416050/

http://www.livemint.com/2009/12/02223559/Shinsei-Bank-to-exit-from-Indi.html

http://www.rediff.com/money/2006/dec/19bank.htm

http://economictimes.indiatimes.com/news/news-by-

industry/banking/finance/banking/Yes-Bank-inks-pact-with-Shinsei-Bank-for-

MAs/articleshow/6980993.cms
http://www.hindustantimes.com/Yes-Bank-Shinsei-in-cross-border-M-amp-A-advisory-pact/Article1-630573.aspxhttp://www.hindustantimes.com/Yes-Bank-Shinsei-in-cross-border-M-amp-A-advisory-pact/Article1-630573.aspxhttp://www.business-standard.com/india/news/yes-bank-inks-pactshinsei-bank-for-mergersacquisitions/416050/http://www.business-standard.com/india/news/yes-bank-inks-pactshinsei-bank-for-mergersacquisitions/416050/http://www.livemint.com/2009/12/02223559/Shinsei-Bank-to-exit-from-Indi.htmlhttp://www.rediff.com/money/2006/dec/19bank.htmhttp://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Yes-Bank-inks-pact-with-Shinsei-Bank-for-MAs/articleshow/6980993.cmshttp://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Yes-Bank-inks-pact-with-Shinsei-Bank-for-MAs/articleshow/6980993.cmshttp://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Yes-Bank-inks-pact-with-Shinsei-Bank-for-MAs/articleshow/6980993.cmshttp://www.hindustantimes.com/Yes-Bank-Shinsei-in-cross-border-M-amp-A-advisory-pact/Article1-630573.aspxhttp://www.hindustantimes.com/Yes-Bank-Shinsei-in-cross-border-M-amp-A-advisory-pact/Article1-630573.aspxhttp://www.business-standard.com/india/news/yes-bank-inks-pactshinsei-bank-for-mergersacquisitions/416050/http://www.business-standard.com/india/news/yes-bank-inks-pactshinsei-bank-for-mergersacquisitions/416050/http://www.livemint.com/2009/12/02223559/Shinsei-Bank-to-exit-from-Indi.htmlhttp://www.rediff.com/money/2006/dec/19bank.htmhttp://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Yes-Bank-inks-pact-with-Shinsei-Bank-for-MAs/articleshow/6980993.cmshttp://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Yes-Bank-inks-pact-with-Shinsei-Bank-for-MAs/articleshow/6980993.cmshttp://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Yes-Bank-inks-pact-with-Shinsei-Bank-for-MAs/articleshow/6980993.cms


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INCOME STATEMENT

Currency inMillions of Japanese Yens

As of: Mar 312007

Restated

JPY

Mar 312008

Reclassified

JPY

Mar 312009

Reclassified

JPY

Mar 312010JPY

4-YearTrend

TOTAL REVENUES 243,934.0 482,352.0 66,047.0 150,563.0

GROSS PROFIT 243,934.0 482,352.0 66,047.0 150,563.0

Selling General & Admin Expenses,Total

140,009.0 158,761.0 169,947.0 157,366.0

EBT, EXCLUDING UNUSUAL ITEMS 31,341.0 72,355.0-

149,474.0-68,513.0

Merger & Restructuring Charges -- -- -12,544.0 --

Impairment of Goodwill -95,146.0 -- -30,905.0 -61,596.0

Other Unusual Items, Total -1,902.0 20,199.0 73,867.0 7,019.0

Legal Settlements -- -- -3,662.0 --

Other Unusual Items -1,902.0 21,118.0 77,529.0 21,029.0

EBT, INCLUDING UNUSUAL ITEMS -65,707.0 92,554.0-

119,056.0-

123,090.0

Income Tax Expense -21,366.0 14,402.0 10,470.0 8,253.0

Minority Interest in Earnings -16,643.0 -18,044.0 -13,558.0 -8,807.0

Earnings from Continuing Operations -60,984.0 60,108.0 -143,084.0 -140,150.0

NET INCOME -60,984.0 60,108.0-

143,084.0-

140,150.0

NET INCOME TO COMMONINCLUDING EXTRA ITEMS

-60,984.0 59,624.0 -143,084.0 -140,150.0


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INDUSTRY PROFILE

Indias banking sector attracted increasing attention since 1991

when a financial reform programme was launched. Since 1991,

India has been engaged in banking sector reforms aimed at

increasing the profitability and efficiency of the then 27 public-

sector banks that controlled about 90 per cent of all deposits,

assets and credit. The reforms were initiated in the middle of a

current account crisis that occurred in early 1991. The crisis

was caused by poor macroeconomic performance, characterized

by a public deficit of 10 per cent of GDP, a current account deficit

of 3 per cent of GDP, an inflation rate of 10 per cent, and growingdomestic and foreign debt, and was triggered by a temporary oil

price boom following the Iraqi invasion of Kuwait in 1990.

In 1993, the Reserve Bank of India permitted private entry into

the banking sector, provided that new banks were well

capitalized and technologically advanced, and at the same time

prohibited cross-holding practices with industrial groups. The

Reserve Bank of India also imposed some restrictions on new

banks with respect to opening branches, with a view to

maintaining the franchise value of existing banks.

As a result of the reforms, the number of banks increased rapidly.

In 1991, there were 27 public-sector banks and 26 domestic

private banks with 60,000 branches, 24 foreign banks with 140

branches, and 20 foreign banks with a representative office.4

Between January 1993 and March 1998, 24 new private banks

(nine domestic and 15 foreign) entered the market; the totalnumber of scheduled commercial banks, excluding specialized

banks such as the Regional Rural Banks rose from 75 in 1991/92

to 99 in 1997/98. Entry deregulation was accompanied by

progressive deregulation of interest rates on deposits and

advances. From October 1994, interest rates were deregulated in


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a phased manner and by October 1997, banks were allowed to

set interest rates on all term deposits of maturity of more than 30

days and on all advances exceeding Rs 200,000. While the CRR

and SLR, interest rate policy, and prudential norms have always

been applied uniformly to all commercial banks, the ReserveBank of India treated foreign banks differently with respect to the

regulation that requires a portion of credit to be allocated to

priority sectors. In 1993, foreign banks which used to be exempt

from this requirement while all other commercial banks were

required to earmark 40 per cent of credit were required to

allocate 32 per cent of credit to priority sectors.

Until upto a couple of years back, the news that Indian companies having acquired

American-European entities was very rare. However, this scenario has taken a

sudden U turn. Nowadays, news of Indian Companies acquiring a foreign

businesses are more common than other way round.

Buoyant Indian Economy, extra cash with Indian corporates, Government policies

and newly found dynamism in Indian businessmenhave all contributed to this

new acquisition trend. Indian companies are now aggressively looking at North

American and European markets to spread their wings and become the global

players.The Indian IT and ITES companies already have a strong presence in foreign

markets, however, other sectors are also now growing rapidly. The increasingengagement of the Indian companies in the world markets, and particularly in the

US, is not only an indication of the maturity reached by Indian Industry but alsothe extent of their participation in the overall globalization process.
http://trak.in/Tags/Business/2007/05/30/india%E2%80%99s-new-found-confidence-global-acquisitions/http://trak.in/Tags/Business/2007/05/30/india%E2%80%99s-new-found-confidence-global-acquisitions/


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Here are the top 10 acquisitions made by Indian companies

worldwide:


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AcquirerTarget

Company

Countr

y

targete

d

Deal

value ($

ml)

Industry

Tata

Steel

Corus Group

plcUK 12,000 Steel

HindalcoNovelis Canada 5,982 Steel

Videoco

n

Daewoo

Electronics

Corp.

Korea 729 Electronics

Dr.Reddys

Labs

BetapharmGerman

y597

Pharmaceuti

cal

Suzlon

Energy

Hansen

GroupBelgium 565 Energy

HPCL

Kenya

Petroleum

Refinery Ltd.

Kenya 500 Oil and Gas

Ranbaxy

LabsTerapia SA

Romani

a324 Pharmaceuti

cal

Tata

SteelNatsteel

Singapo

re293 Steel

Videoco

nThomson SA France 290 Electronics

VSNL Teleglobe Canada 239 Telecom

If you calculate top 10 deals itself account for nearly US $ 21,500 million. This is

more than double the amount involved in US companies acquisition of Indian

counterparts.Graphical representation of Indian outbound deals since 2000.


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Indian outbound deals, which were valued at US$ 0.7 billion in 2000-01,increased to US$ 4.3 billion in 2005, and further crossed US$ 15 billion-mark in2006. In fact, 2006 will be remembered in Indias corporate history as a year whenIndian companies covered a lot of new ground. They went shopping across theglobe and acquired a number of strategically significant companies. Thiscomprised 60 per cent of the total mergers and acquisitions (M&A) activity inIndia in 2006. And almost 99 per cent of acquisitions were made with cashpayments.

Mergers and Acquisitions

The total M&A deals for the year during January-May 2007 have been 287 with avalue of US$ 47.37 billion. Of these, the total outbound cross border deals havebeen 102 with a value of US$ 28.19 billion, representing 59.5 per cent of the totalM&A activity in India.The total M&A deals for the period January-February 2007 have been 102with a value of US$ 36.8 billion. Of these, the total outbound cross border dealshave been 40 with a value of US$ 21 billion.There were 111 M&A deals with a total value of about US$ 6.12 billion in March

and April 2007. Of these, the number of outbound cross border deals was 32 witha value of US$ 3.41 billion.

There were 74 M&A deals with a total value of about US$ 4.37 billion in May2007. Of these, the number of outbound cross border deals was 30 with a value ofUS$ 3.79 billion.


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The sectors attracting investments by Corporate India include metals,pharmaceuticals, industrial goods, automotive components, beverages, cosmeticsand energy in manufacturing; and mobile communications, software and financialservices in services, with pharmaceuticals, IT and energy being the prominent onesamong these.

Mergers and acquisitions in India are on the rise. Volume of mergers andacquisitions in India in 2007 are expected to grow two fold from 2006 and fourtimes compared to 2005.

India has emerged as one of the top countries with respect to merger andacquisition deals. In 2007, the first two months alone accounted for merger andacquisition deals worth $40 billion in India. The estimated figures for the entireyear projected a total of more than $ 100 billions worth of mergers and

acquisitions in India. This is two fold growth from 2006 and a growth of almostfour times from 2005.

Mergers and Acquisitions in different sectors in India

Sector wise, large volumes of mergers and mergers and acquisitions in India have

occurred in finance, telecom, FMCG, construction materials, automotives and

metals. In 2005 finance topped the list with 20% of total value of mergers and

acquisitions in India taking place in this sector. Telecom accounted for 16%, while

FMCG and construction materials accounted for 13% and 10% respectively.

In thebanking sector, important mergers and acquisitions in India in recent years

include the merger between IDBI (Industrial Development bank of India) and its

own subsidiary IDBI Bank. The deal was worth $ 174.6 million (Rs. 7.6 billion in

Indian currency). Another important merger was that between Centurion Bank and

Bank of Punjab. Worth $82.1 million (Rs. 3.6 billion in Indian currency), this

merger led to the creation of the Centurion Bank of Punjab with 235 branches in

different regions of India.

MERGER AND ACQUISITION OF YES BANK AND SHINSEI

BANK
http://finance.mapsofworld.com/business-deals/http://finance.mapsofworld.com/business-deals/http://finance.mapsofworld.com/finance/http://finance.mapsofworld.com/banks/http://finance.mapsofworld.com/capital-market/companies/idbi-services.htmlhttp://finance.mapsofworld.com/business-deals/http://finance.mapsofworld.com/business-deals/http://finance.mapsofworld.com/finance/http://finance.mapsofworld.com/banks/http://finance.mapsofworld.com/capital-market/companies/idbi-services.html


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Japans shinsei bank made headlines in India late last year when it bid for a 26 per

cent stake in the beleaguered New Delhi headquartered term-lender IFCI along

with Punjab National Bank and US-based investor JC Flowers. The IFCI deal isnow off, but the larger point is that unlike other Japanese companies, financial

services players from the Land of the Rising Sun have not made much of an

impact in India. And that might well change in the years ahead, says Shinsei

Banks Country Manager (India) & Regional Manager (South East Asia) Sanjay

SachdeV.

Over the past year, Shinsei Bank has been examining various opportunities that

exist in Indias financial markets. We have a strong partnership with UTI. They

launched a co-branded fund in Japan, and this venture has been a phenomenalsuccess with assets of over $500 million. They also engaged in the domestic asset

management industry in India. Then, the stressed-asset space has some great

opportunities, and this is an area where Shinsei Bank has significant expertise.

Dealing with that challenge led us to develop significant expertise in the stressed-

assets business which we have used successfully in Taiwan, Korea and Germany.

Shinsei also focused in the Indian market . Infrastructure is also a space they were

keen to invest in.

During the course of its operation in various other countries Shinsei Bank faced ahuge challenge in various sectors. Billionaire J. Christopher Flowers saysShinsei

Bank Ltd., the Japanese lender he partly owns, over-reached with investments in

the U.S. and Europe that turned sour.

In retrospect, the overseas investments were too large, Flowers, who is the

banks largest private shareholder, said in a telephone interview. But they didnt

seem too unusual at the time.

Shinsei, the first Japanese bank taken over by foreign investors, has booked morethan $1 billion in losses and charges on toxic assets including loans to failed

Lehman Brothers Holdings Inc. and an investment it made through J.C. Flowers &

Co. in Germanys Hypo Real Estate Holding AG.

Japans taxpayers were taken to the cleaners after the government spent 7.9

trillion yen rescuing the lender, saysKenichi Ohmae, a former chairman of
http://search.bloomberg.com/search?q=Christopher+Flowers&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://www.bloomberg.com/apps/quote?ticker=8303:JThttp://www.bloomberg.com/apps/quote?ticker=8303:JThttp://www.bloomberg.com/apps/quote?ticker=8303:JThttp://search.bloomberg.com/search?q=Kenichi+Ohmae&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Christopher+Flowers&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://www.bloomberg.com/apps/quote?ticker=8303:JThttp://www.bloomberg.com/apps/quote?ticker=8303:JThttp://www.bloomberg.com/apps/quote?ticker=8303:JThttp://search.bloomberg.com/search?q=Kenichi+Ohmae&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1


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consulting firm McKinsey & Co. in Japan. Flowers and other investors reaped at

least a fourfold profit by raising 555 billion yen ($6.1 billion) in two share sales

after they bought the failed Long-Term Credit Bank of Japan Ltd. from the

government in 2000 for 121 billion yen.

These people werent interested in managing a bank, said Ohmae. They were

interested in making money.

Flowers, a former Goldman Sachs Group Inc. partner, said Shinsei had been

involved in lots of deals with his fund during his nine years as a leading private

shareholder.

The overall record is a very profitable one for Shinsei and for us, he said,

without giving details. Why people still talk about us chasing short-term gains isa mystery to me.

Toxic Investments

Flowers and New York-based Cerberus Capital Management LP are being

criticized in Japan for losses on toxic investments overseas. Aozora Bank Ltd.,

controlled by Cerberus, last week forecast a 196 billion yen loss this financial year

after losses on subprime mortgages, GMAC LLC shares and Bernard Madoffs

fund.

Buyout funds globally are struggling to contain losses on investments in

companies from Germany to the U.S. as the global recession slashes earnings.

Masamoto Yashiro, 80, Shinseis former chief executive officer recalled to helm

the bank in November, says the lender had poor risk management, staked too

much for its size and missed signs of Lehmans coming collapse.

The banks Tier 1 capital ratio, a key indicator of financial strength, is the lowest

of eight nationwide lenders at 6.64 percent at the end of last year, according to

Bloomberg data.

The problems very much were reflected in its share market, TSE (Tokyo Stock

Exchange).share prices fell down each and every time from 660 JPY (Japanese

Yen) in 2006 to 56 JPY in 2010. In the late 2009 Shinsei bank pledged to sell its
http://search.bloomberg.com/search?q=Bernard+Madoff&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Masamoto+Yashiro&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Bernard+Madoff&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1http://search.bloomberg.com/search?q=Masamoto+Yashiro&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1


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Indian AMC to any other domestic leader but the deal was never been made till

2010 when it was taken over by Daiwa Securities Group Inc and Daiwa Asset managementCo Ltd, jointly Daiwa Securities Group of Japan.

YES BANK

At just 123 branches, 2000 odd employees, and sub-100 crore quarterly profit

levels, Yes Bank is one of Indias smallest banks in all categories taken together

traditional private banks, new generation private banks, and public sector banks

(PSBs).

But Yes Bank has made good progress in certain niche areas like corporate lending

to the countrys medium to large enterprises, since its start in 2004.

Driven by a massive advertising campaign, Yes Bank projects a profile that is

much ahead of many of Indias private sector banks, but size-wise it is smaller

than most small private banks of India like Federal Bank, South Indian Bank, ING

Vysya Bank, Dhanalakshmi Bank, IndusInd Bank, and even Catholic Syrian Bank.

However, Yes Bank always has the consolation that it is the only Greenfield

banking project in India during the past several years.

Has Yes Bank got what it takes to be a key player in Indias private sector

banking? Comparing to the first five-year growth trajectories of private-sector

successes like ICICI Bank, HDFC Bank, Axis Bank, or Kotak Mahindra Bank, the

growth shown by Yes Bank doesnt come across as promising.

For example, though the profit growth posted for the quarter ending June 30 is not

bad at 84% (QoQ), its component figures are troubling. It was mainly driven by a

103% rise in non-interest income, mainly from Yes Banks treasury operations.

Also, the growth figures are not that impressive on a sequential quarter basis, and

some key numbers like deposits have actually gone down over the just preceding

quarter. The rise in treasury income is highly unlikely again during this fiscal.

Yes Banks newfound strategy titled knowledge-driven banking tries to focus on

Indias sunrise sectors like food, agribusiness, infrastructure, life-sciences,


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technology, sustainability, education etc many of them not enjoying

wholehearted support from traditional banks due to the higher risks involved.

But Yes Bank need to tread carefully in these domains as it already has a serious

non-performing assets (NPA) problem. During the first quarter of this fiscal, YesBanks gross non-performing assets (NPAs) have made a dangerous jump nearly

three times and their non-tax provisions have also shot up by over five times,

signaling major problems in loan defaults and restructuring.

Promoted by former Rabobank India head Rana Kapoor, one of Yes Banks largest

shareholders is the Netherlands based Rabobank. A Dutch cooperative bank

consortium owned by its customers, Rabobank primarily caters to agriculture and

food business. Though known for good management, Rabobanks Irish unit has

been in deep trouble for some time due to almost one-third of its assets turning

non-performing, and was in need of a government bailout.

Until now, Yes Bank followed an unconventional strategy of ignoring the business

of current account / savings account (CASA) deposits. And until now, Yes Bank

had shied away from retail banking, citing high risks. But now, when established

retail players like ICICI, HDFC, & Axis are scaling down their retail operations

due to proven risks, Yes Bank is pinning much hope on retail lending.

But with one of the tiniest CASA ratios in India at around 9% - Yes Banks

plans to source funds for the highly competitive retail lending segment might

prove to be difficult. The bank has little access to low-cost CASA deposits, while

its exposure to high-cost deposits is high.

Yes Bank is known to take risks, a recent example being the participation in the

controversial plan to revive Subhiksha. The soundness of this strategy is doubtable

as peers like Kotak Mahindra Bank who had earlier funded the troubled retailer

has opted out of the consortium and instead filed a winding-up petition in courtsagainst Subhiksha.

Yes Bank was also recently mentioned in Lok Sabha for violation of one or more

of five RBI guidelines, together with 12 banks. The exact violation in Yes Banks

case whether it was irregularities in Know-Your-Customer (KYC), Initial Public


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Offer (IPO), Foreign Exchange Management Act (FEMA), Cash Reserve Ratio

(CRR), or Statutory Liquidity Ratio (SLR) is not known. The bank declined to

comment on a query on this issue.

So in the very beginning of financial year 2010-2011 Yes Bank started looking for

its expansion programs. Private sector lenrder Yes Bank has zeroed in on two

banks as possible acquisition targets and could execute the buy-out in the next 18-

24 months, a top bank official said.

"We have one or two banks on our radar...in 18-24-month time, we should belooking at this (a possible acquisition)," Yes Bank Chairman and Managing

Director Rana Kapoor said in an interactive session.

With bank valuations still at reasonable levels and not expected to increase in themedium-term, an acquisition would certainly be attractive, he said without givingthe names of the two banks in its radar.

"The good news is that valuations are not increasing." Ruling out its acquisition by

another bank, the Yes Bank chief said that "(We feel) it would not be desirable to

merge with other banks. We don't want to lose our identity, lose direction and lose

our vision by doing so."

He was responding to reports that a few foreign banks had expressed their interest

in acquiring the new generation lender.

Recently, HSBC Bank hiked its stake in the bank to 4.88 per cent, which Kapoortermed as "a purely financial investment".

While Kapoor remained tight-lipped, the banking industry grapevine feelsKarnataka Bank, Karur Vysya Bank and Kerala-based Catholic Syrian Bank,

Federal Bank and South Indian Bank could be potential acquisition targets.

With the domestic banking sector to be opened up from 2009, consolidation

momentum could pick-up as banks brace themselves up to face emerging

competition.

The process has already been kick-started with IDBI taking over United WesternBank and the merger between HDFC Bank and Centurion Bank of Punjab.

It would be logical for recent entrants such as Yes Bank to supplement theirorganic growth plans with mergers and acquisitions so as to expand their pan-India

footprint rapidly.


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Yes Bank has already geared up for the post-2009 scenario by investing in its

management team, Kapoor said. "We have invested significantly in our

management team...to execute, migrate and to integrate the process," he said.

On the organic front, the bank plans to scale up its branch network aggressively.

"We are looking at a robust branch expansion. We plan to up our branch strengthto 250 by September 2010 from the present 67," he said, adding "simultaneously,

we will ensure that our capital base remains rock solid."

Promoters have a 34 per cent stake in Yes Bank while foreign shareholders have a

combined holding of 55 per cent. Mutual funds, NRIs and employees hold 3 per

cent and others 8 per cent.

So with a view to make a joint operation Yes Bank and Shinsei Bank signed a

MoU (Memorandum of Understanding) on 25th of November, 2010 .

The effect of this Merger and Acquisition can be seen in the share prices at NSE

:YESBANK.NS
http://in.finance.yahoo.com/q?s=YESBANK.NShttp://in.finance.yahoo.com/q?s=YESBANK.NShttp://in.finance.yahoo.com/q?s=YESBANK.NS


19/20

Top of Form

Bottom of Form

Splits:none

Last Trade: 307.90INR

Trade Time: Nov 29

Change: 0.80 (0.26%)

Prev Close: 307.10

Open: 309.70

Bid: 308.00

Ask: 307.901y Target Est: N/A

Day's Range: 305.00 - 314.25

52wk Range: 40.60 - 262.00

Volume: 1,433,729

Avg Vol (3m): 2,472,490

Market Cap: N/A

P/E (ttm): N/A

EPS (ttm): N/A

Div & Yield: N/A (N/A%)

All in all the M&A OF Yes Bank and Shinsei Bank of Japan did have a good

response in the market. The share prices were not lowered much and both from

Yes Bank and Shinsei it was a good environment to merge up and both the


20/20

managements are eagerly waiting to work in collaboration with a diversified cross-

border culture.

Date post:	09-Apr-2018
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Yes Bank and Shinsei in Cross

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