Shares of YES Bank Ltd are in focus on Thursday morning after a media report suggested that two Japanese lenders namely Sumitomo Mitsui Banking Corporation (SMBC) and MUFG, who had evinced interest in picking up a majority stake in the private lender, are no longer interested in the deal, citing sources. The State Bank of India (SBI) was looking to sell 24 per cent stake in YES Bank.
According to individuals involved in the deal, potential differences in control-related concerns between the buyers and regulators in India may have delayed the transaction, at least for the time being, Moneycontrol reported.
Bankers, as per the report, noted that SMBC and MUFG’s concerns about how they would consolidate YES Bank into their group financials, due to the voting rights cap, also resulted in the suspension of stake-sale discussions.
Sources told Moneycontrol that the structures proposed by the buyers failed to convince the RBI, with the central bank reportedly having raised concerns about how foreign banks could acquire a controlling stake in an Indian bank, given their existing status in the country. SMBC and MUFG, the report suggested, would need to obtain new approvals from the RBI in order to convert their existing banking operations into wholly owned subsidiaries, enabling them to acquire a controlling stake in YES Bank.
The private lender has made significant improvements across various parameters, completely weeding out low-rated, high-yielding corporate lending. The YES Bank management told Kotak Institutional Equities that it has not pursued an increase in unsecured retail lending. The proportion of credit cards, MFI, and Personal Loans at YES Bank is significantly lower compared to its competitors.
The management has made considerable progress in turnaround efforts related to deposit mobilisation, with total deposits increasing from Rs 1.7 lakh crore to Rs 2.7 lakh crore.
Kotak said, the bank's yield on advances is comparable to large private banks, distinguishing it from the trend observed in mid-sized private banks.
JM Financial noted that YES Bank expects to gradually increase return on asset from 0.5 per cent at present to 1 per cent by focusing on improving margins by changing asset mix while simultaneously running down corporate book, and organically meeting PSL targets so as to prevent RIDF drag on margins.
"Further, healthy recoveries north of Rs 4,000 crore are expected from SRs which will be used to write back earlier provisions giving additional boost to return metrics. The management acknowledged that C/I ratio has scope for improvement which the bank is optimising by right sizing the organisation," it said.