YES Bank shares up 1%: SMBC stake buy creates room for rating upgrade, says CEO Prashant Kumar

Shares of YES Bank were trading more than 1% higher at ₹21.40 apiece on the NSE in the early trade on Monday, September 22, as the private sector lender said that the Japanese lender SMBC's decision to buy nearly 25% stake in YES Bank should be seen as a vote of confidence and also creates "possibilities" of a rating upgrade.

The nearly ₹16,000 crore bet from Sumitomo Mitsui Banking Corporation (SMBC) is a strategic one from an investor of global repute, and it will help improve Yes Bank's ability to raise capital, drive business growth through network tie-ups and increase profitability, the official said.

"(With) the advantage ...in terms of having a strategic investor, the ability to raise capital, somebody willing to put (money)...the possibility of our rating upgrade is there," Yes Bank's managing director and chief executive Prashant Kumar told PTI in an interview.

Kumar, a career SBI executive who was rushed to helm the recovery of the private bank in March 2020, said that YES Bank's rating has improved to 'AA-' now from 'D' earlier.

Commenting on YES Bank's journey over the last five years, Kumar said, "A bank which was about to close down has not only survived but is also doing very well and able to get one of the very large foreign investments."

An alleged promoter malfeasance, which resulted in the arrest of one of Kumar's predecessors, Rana Kapoor, had led to huge troubles for YES Bank, including questions over the true extent of non-performing loans sitting in the balance sheet, continued losses and an inability to raise capital.

In March 2020, weeks before the onset of the COVID crisis, the RBI and government staged a rescue act which saw banks led by SBI taking a 79% stake in YES Bank and helping it stay afloat. Kumar, who used to then serve as the chief financial officer of the country's largest lender, was put in charge of the effort.

Kumar said a rating upgrade will help the bank get deposits or liabilities from large corporates, institutional investors and also government entities, which are guided by certain rating profiles.

SBI continues to be a major shareholder in the bank with over 10% ownership, which gives further confidence from a capital-raising perspective, Kumar said, adding that the bank is adequately capitalised right now.

YES Bank, the country's leading private sector lender, on July 19, reported a net profit of ₹801 crore for the first quarter of the current financial year (Q1 FY26), marking an increase of 60% from ₹502 crore in the same period last year.

Its net interest income (NII), or the difference between interest earned on loans and expended on deposits, rose 6% to ₹2,371 crore as against ₹2,244 crore in the year-ago period.

The bank's provisions came down by 11% sequentially to ₹284 crore in the June quarter from ₹318 crore in the previous quarter.

YES Bank's asset quality remained stable as its gross non-performing assets (NPA), as a percentage of total advances, came in unchanged at 1.6% sequentially, and on an annual basis its gross NPA came down by 10 basis points from 1.7%.