Three private banks pare Yes Bank stake within 2 weeks of investing

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Published: April 24, 2020 12:40 AM

The other financial institutions who had come to Yes Bank’s rescue in May continue to hold on to their stakes, with State Bank of India (SBI) holding a 48.21% share.

On Thursday, Yes Bank’s shares ended 4.39% lower than their previous close at Rs 28.30 on the BSE.

Three private banks — Federal Bank, IDFC First Bank and Kotak Mahindra Bank – have reduced their stakes in troubled Yes Bank within two weeks of investing in the lender, shareholding data given to the stock exchanges has showed. Between March 17 and March 31, Federal Bank’s stake in Yes Bank fell to 1.92% from 2.39%, IDFC First Bank’s fell 1.67% from 1.99% and Kotak Mahindra Bank’s dropped to 3.61% from 3.98%. The other financial institutions who had come to Yes Bank’s rescue in May continue to hold on to their stakes, with State Bank of India (SBI) holding a 48.21% share.

After the Reserve Bank of India (RBI) imposed a moratorium on Yes Bank and superseded its board on March 5 this year, a number of institutions from the financial sector came together as white knights to infuse equity into the capital-starved bank. At the time, they had agreed to lock in at least 75% of their investment for a three-year period. The other investors are ICICI Bank, Axis Bank, Bandhan Bank and Housing Development Finance Corporation (HDFC).

After the implementation of the reconstruction scheme, Yes Bank has been relying on certificates of deposit (CDs) to raise money for its operations at a time depositors’ confidence in private banks has been shaken. On March 26, Yes Bank’s board had approved equity fundraising of up to Rs 5,000 crore. Analysts expect the bank to go for a rights issue in the months ahead, which would involve existing shareholders bringing in more money.

Sector analysts said the success of the scheme for reconstruction of Yes Bank is crucial for the bank’s future. In a note dated March 7, HDFC Securities wrote, “It is difficult to assess the quantum of stressed exposure at YES (fund+ non-fund based) and possible addition to the same. In the event funds infused are not able to offset the increase in NPLs (non performing loans) and required provisions, the scheme may not succeed.”

Thereafter, Yes Bank in its results for Q3FY20 reported a net loss of Rs 18,560 crore against a net profit of Rs 1,002 crore a year ago. The loss came on the back of a 4,400% year-on-year jump in provisions, which stood at Rs 24,766 crore for the December quarter. Slippages for the quarter were to the tune of Rs 24,587 crore, while gross non-performing assets (NPAs) stood at Rs 40,709 crore, or 18.87% of the loan book. The bank’s provision coverage ratio (PCR) improved to 72.7% from 43.1% in the September quarter. Its capital adequacy tier-1 (CET-1) ratio dropped to 0.6% from 8.7% a quarter ago. The bank had said the number would improve to 7.6% after the fresh round of infusion by multiple banks.

On Thursday, Yes Bank’s shares ended 4.39% lower than their previous close at Rs 28.30 on the BSE.

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