scorecardresearchYes Bank shares drop 12.5% after three-year lock-in period ends

Yes Bank shares drop 12.5% after three-year lock-in period ends

Updated: 13 Mar 2023, 12:50 PM IST
TL;DR.

On March 13, the lock-in period for Yes Bank's investors expired, allowing them to sell their shares in the secondary market. However, most of the banks had already sold almost 25% of their holdings in the bank, which were not under the lock-in.

The bank saw an 80% YoY decline in standalone net profit to  <span class='webrupee'>₹</span>52 crore in Q3FY23 from  <span class='webrupee'>₹</span>266 crore in the same quarter of the previous fiscal.

The bank saw an 80% YoY decline in standalone net profit to 52 crore in Q3FY23 from 266 crore in the same quarter of the previous fiscal.

Shares of Yes Bank declined by almost 12.75% to 14.40 apiece after the three-year lock-in period for investors, mandated by the Reserve Bank of India, expired.

On March 5, 2020, the RBI imposed restrictions on Yes Bank after a dramatic rise in toxic assets, which jumped to over 26%.

A consortium of financial institutions led by the State Bank of India (SBI) rescued Yes Bank under RBI's rescue plan. The other institutions that contributed to the reconstruction plan included ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, IDFC First Bank, Bandhan Bank and Federal Bank.

Together, these institutions infused a total of 10,000 crore into Yes Bank to stabilize its finances and prevent a potential collapse. They were mandated to hold 75% of their shares bought as part of the rescue plan for three years.

On March 13, the lock-in period for Yes Bank's investors expired, allowing them to sell their shares in the secondary market. However, most of the banks had already sold almost 25% of their holdings in the bank, which were not under the lock-in period.

SBI purchased a 48% stake in Yes Bank for 6,050 crore initially and now holds a 26.14% stake as of December 31, 2022. ICICI Bank has a 2.6% stake, and HDFC Bank has a 3.48% stake. Axis Bank, IDFC First Bank, and Bandhan Bank each have a stake between 1 and 2% in Yes Bank, as per media reports.

Earlier, in a news report, it was stated that SBI may consider reducing its stake in Yes Bank once the lock-in period ends.

"Till March 2023, we are required to hold a 26 percent stake in Yes Bank. If it all, our stake comes within 26 percent till March 2023, I am quite okay with that. Beyond that, we've not thought at the board level," SBI chairman Dinesh Khara had told analysts at the December quarter earnings call.

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Stock Price chart of Yes Bank

Yes Bank reported a net loss in the third quarter that ended in December despite a majority of the private sector banks reporting robust earnings.

The bank saw an 80% YoY decline in standalone net profit to 52 crore in Q3FY23 from 266 crore in the same quarter of the previous fiscal. Sequentially, the net profit was down 66%.

The bank's net interest income, however, increased 11.7% to 1,970.6 crore in Q3FY23 from 1,764 crore in the year-ago period. Its total net income, meanwhile, stood at 3,114 in Q3 FY23, up 24% YoY and 7% up QoQ.

The bank recorded new sanctions and disbursements of 27,311 crore in Q3 FY23. Meanwhile, its balance sheet during the quarter under review grew 12.9% YoY to 3,43,798 crore.

The total deposits stood at 2,13,608 crore, up 15.9% YoY and the net advances during the quarter stood at 1,94,573 crore, up 10.4% YoY.

In its recent report, domestic brokerage firm ICICI Direct Research said the bank witnessed a gradual improvement in business growth as well as asset quality in the last six quarters. Recently, the bank has concluded the sale of stressed assets to JC Flower, which has led to a substantial reduction in GNPA to 2%.

“Focus on growth along with margin improvement may enable the bank to improve its RoA to a guidance of 0.9–1% in FY25. However, given a security receipt (SR) of 3,770 crore (from the sale of stressed assets with a face value of 6,800 crore) and ageing on the same, earnings could remain volatile on a quarterly basis,” said the brokerage. 

The bank has a footprint of 1,145 branches across the country.

Meanwhile, Yes Bank is one of four banks selected by the RBI for the first pilot launch of India's central bank digital currency, referred to as the "Digital Rupee."

14 analysts polled by MintGenie on average have a 'sell' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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First Published: 13 Mar 2023, 12:50 PM IST