YES Bank shares at highest level in nearly four months; here is why

YES Bank shares, the country's leading private sector lender, have been witnessing strong buying interest since the start of September. The stock has advanced nearly 12% so far this month to hit its highest level in nearly four months of ₹21.37, data from the stock exchanges showed.

The bank came on investors' radar after one of Japan's largest banking groups, Sumitomo Mitsui Banking Corporation (SMBC), got an approval last month from the Reserve Bank of India (RBI) to acquire up to 24.99% of its paid-up share capital or voting rights.

The nod came as part of the earlier announced deal in which SMBC said it will purchase 13.19% from State Bank of India (SBI) and 6.81% from seven other lenders, including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank.

The RBI clarified that SMBC would not be classified as a promoter post-acquisition. The approval is valid for one year and remains subject to compliance with the Banking Regulation Act, FEMA provisions, and CCI clearance.

Following RBI's approval, YES Bank saw multiple banks, which held stakes in YES Bank, sell their shares to SMBC.

Last week, The Federal Bank and Bandhan Bank reduced their shareholding in the lender following SBI’s completion of its divestment in the private lender.

Bandhan Bank sold 15.39 lakh shares of YES Bank to Japan’s Sumitomo Mitsui Banking Corporation (SMBC) at ₹21.50 per share. This reduced Bandhan Bank’s stake in YES Bank from 0.70% to 0.21%.

Further, The Federal Bank also “sold 166,273,472 equity shares of face value of ₹2.00 each of the Company held by the Bank, in favour of SMBC, at a consideration of ₹21.50 per share,” the lender said in a regulatory filing.

YES Bank's one of the largest shareholders – SBI – also divested its stake in the bank to SMBC as the lender completed the divestment of a 13.19% stake in Yes Bank to SMBC.

Prior to the deal, SBI held a 23.96% stake in YES Bank, June's shareholding data showed.

Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC Bank also held over 1% stake in YES Bank at the end of the June quarter.

YES Bank’s rescue plan

YES Bank was rescued by a consortium of lenders led by SBI in 2020 when the RBI had placed the bank under a moratorium due to a liquidity crisis and massive losses, resulting in a consortium led by SBI providing capital and other banks taking stakes to stabilise the private bank.

On March 5, 2020, the RBI imposed a moratorium on YES Bank, capping withdrawals at ₹50,000 per depositor, and superseded the board, appointing a new administrator.

A consortium of banks, including SBI, ICICI Bank, HDFC Bank, and Kotak Mahindra Bank, agreed to inject capital into Yes Bank to stabilise its balance sheet and restore confidence. SBI alone invested ₹7,250 crore to acquire a significant stake.

Existing shareholders were locked in, with a portion of their holdings restricted from sale for three years to prevent further destabilisation.

Sumitomo Mitsui Financial Group last week agreed to acquire a 4.2% stake in YES Bank from Carlyle affiliate CA Basque Investments, increasing its total holding in the Indian lender to 24.2%.

SMBC is a wholly owned subsidiary of Sumitomo Mitsui Financial Group, Inc. (SMFG). It is among the leading foreign banks in India, and SMFG's wholly owned subsidiary, SMFG India Credit Company, is among the largest diversified NBFCs in India.