Yes Bank gets a major push

SMBC, the banking arm of Japanese financial services major SMFG is buying a 20% stake in Yes Bank:

- mohan@bankingfrontiers.​com

Yes Bank, which had faced a major crisis and was subjected to a moratorium and several restraints on operations by the Reserve Bank of India in 2020 and had come out of it after effective remedial measures were initiated, has now received a major fillip. Japanese banking major Sumitomo Mitsui Banking Corporation, or SMBC, has recently signed a definitive agreement with the bank whereby it will buy a 20% stake in the bank. This is the largest cross-border M&A deal in India’s financial services sector.

STAKES FROM SBI, OTHERS

SMBC will buy the stake from 8 existing shareholders of the bank worth ₹134.8 billion (around $1.58 billion). It will, post the stake acquisition, be the largest shareholder in the bank. Under the deal, it buys 13.19% stake from the State Bank of India, and 6.81% stake from Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank and Kotak Mahindra Bank. These banks had acquired the stakes under a regulator-initiated restructuring of the bank in March 2020 to resurrect it from a certain collapse. SBI in total has a 24% stake in the bank, while the other banks together has 11.34% stake. The transaction is subject to regulatory approvals from the Reserve Bank of India, Competition Commission of India and shareholders of the bank. SMBC has got a formal go-ahead from the central bank.

The stake acquisition has been welcomed by analysts. Moody's Ratings too said it is ‘credit positive’ for the bank, as it brings in a long-term strategic partner with a strong balance sheet and funding capacity to support its growth.