MUFG Reenters Yes Bank Race, Aims for Majority Stake in India’s Sixth-Largest Private Bank

Japan’s Mitsubishi UFJ Financial Group (MUFG), the second-largest bank holding company in the world, is back in the running to acquire a majority stake in Yes Bank, India’s sixth-largest private bank. This comes after MUFG’s recent proposal to invest $2 billion in HDB Financial, HDFC Bank’s non-banking arm, was rejected.

Yes Bank’s current market value is approximately ₹68,586.98 crore, and a 51% stake sale would mark the largest merger and acquisition in India’s banking sector. Yes Bank is looking for a new owner four years after being rescued by the central bank and successfully turning around its operations. Earlier this year, MUFG was considered a potential bidder but withdrew from the race before returning to the table after its HDB talks fell through.

MUFG has already made a non-binding offer to buy State Bank of India’s (SBI) 23.99% stake in Yes Bank, which would trigger an open offer for an additional 26% stake. The bank is currently conducting a detailed assessment of Yes Bank, with about four to six weeks to complete this process. No exclusivity agreements have been signed yet.

Other domestic banks and institutions, including HDFC Bank, ICICI Bank, and Axis Bank, collectively own 11.34% of Yes Bank. Currently, negotiations are only taking place with SBI, the largest shareholder, and Yes Bank’s management. It remains uncertain whether other stakeholders will exit alongside SBI since they lack any rights that would compel them to sell.

MUFG is only willing to proceed with a binding offer if it can secure a majority stake in Yes Bank. The bank is working with legal and regulatory advisors to finalize the deal structure.

The situation remains fluid, and there’s no guarantee that discussions will lead to an agreement soon. As the market for private bank ownership in India is limited, SBI is looking for a premium for its control. However, Yes Bank’s stock performance has been lackluster, declining by 1.9% this year, closing at ₹21.86 on Thursday following a weak business update for the September quarter.

Yes Bank reported an 18.3% year-on-year increase in total deposits for the September quarter, reaching ₹2,77,173 crore. This was a slight decrease from the 20.9% growth reported in the previous quarter. Despite the growth in deposits, Yes Bank continues to lag behind other top private banks in terms of net interest margins and priority sector lending, which requires banks to allocate at least 40% of their loans to sectors like agriculture and small businesses.