YES Bank shares have been on a strong upward trajectory, rallying over 21% in just five trading sessions. The momentum continued on Thursday after global credit rating agency Moody’s Ratings labeled the proposed 20% stake acquisition by Sumitomo Mitsui Banking Corporation (SMBC) as “credit positive” for the bank. Moody’s highlighted that the entry of SMBC brings a financially strong, long-term strategic partner with the capacity to fund and support YES Bank’s future growth.
SMBC, part of the Japanese financial conglomerate Sumitomo Mitsui Financial Group (SMFG), is set to acquire the stake from State Bank of India (SBI) and seven private banks—HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank. These banks had invested in YES Bank during its reconstruction in March 2020. The acquisition, pegged at ₹21.50 per share, amounts to a total deal size of ₹13,482 crore.
Post-acquisition, YES Bank will become an equity-method affiliate of SMFG, subject to regulatory and shareholder approvals. SMFG already operates in India through its NBFC arm, SMFG India Credit—one of the country’s largest diversified NBFCs. As part of the deal, SMBC will gain the right to nominate two non-executive directors to YES Bank’s board, while SBI’s nomination rights will reduce from two to one.
The stake acquisition is still pending approvals from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI). Although RBI typically caps foreign ownership in Indian banks at 15%, exceptions can be made in cases involving distressed banks.
On the market front, YES Bank’s stock rose 2.65% to ₹21.52 on Wednesday, pushing its market capitalization close to ₹68,000 crore. The stock had closed at ₹20.96 the previous day, continuing a steady climb since the acquisition announcement.
Meanwhile, reports have surfaced that YES Bank has initiated a formal search for a new Chief Executive Officer (CEO). The bank’s board has reportedly engaged global executive search firm Egon Zehnder to lead the recruitment process.
Despite the positive sentiment, brokerage firms remain cautious. They argue that the bank’s core fundamentals remain unchanged. In a recent note, Kotak Institutional Equities remarked that while the identity of the buyer offers some clarity, the underlying business model of YES Bank has not evolved. The brokerage reiterated its ‘sell’ rating with a target price of ₹17, adding that YES Bank still lags behind its peers in terms of profitability and growth metrics.
In summary, while the market is cheering the potential SMBC partnership, analysts urge investors to look beyond sentiment and assess the bank’s structural and operational challenges before taking a bullish stance.
