Private sector creditor YES Bank’s stock closed at Rs 20.40 on Monday with a increase of 2.35 per cent on NSE. It was announced last week that Japan’s Sumitomo Mitsui Banking Corporation (SMBC) would acquire the bank’s 20 per cent stake for Rs 13,482 crore. This is the biggest deal ever in India’s banking sector. However, the stock performed weaker than the comprehensive indices, while the Nifty Bank index increased by 3.3 per cent and the Nifty 50 by 3.8 per cent.
As part of the deal with SMBC, State Bank of India (SBI) will sell 13.2 per cent out of 24 per cent for Rs 8,889 crore while seven other private sector banks including HDFC Bank, ICICI Bank and Axis Bank will sell 6.81 per cent stake for Rs 4,594 crore. According to Prashant Kumar, Managing Director and Chief Executive Officer of Yes Bank, the deal will remove the negative effect from the bank and it can also be rated again, which will give the bank many opportunities for funding and loan.
Kotak Institutional Equities said in a report, “The situation of improvement in Yes Bank today is a unique case in the Indian banking industry, where the coordinated efforts of the stakeholders have helped an institution to reopen it from the crisis.” The important thing is that the returns to shareholders have been better than initial expectations. This transaction doubled in five to six years on completion of the transaction. However, the report states that YES Bank still remains to be gaining profitability and growth ratio to the average of the industry.
The report said, the bank has successfully done its loans and deposits in small parts. But the profitability ratio around the average of the industry has been challenging. But this issue is not limited to Sairaf Yes Bank but is common for most middle-level private banks. The report states that being part of a large and strong group should provide relief to depositors (low cost of money) and shareholders (capacity to raise capital).
The report states, although there are challenges facing the bank that obstruct returns on equity expansion: such as cost structure; Revenue profiles and mixed loans options according to weak NIM. According to Investor Research, there is no change in the control of management so far from the stake sales, but it remains to be seen whether SMBC considers its stake in the bank further considering. He also said that the stake sales would increase SBI’s Common Equity Tier 1 ratio by 11 basis points, which is not very important.
First Published – May 12, 2025 | 11:16 PM IST
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