Yes Bank in Talks to Sell Stake, Provide Exit for SBI and Other Lenders

Mumbai: Yes Bank, a private sector lender, is working on providing an exit for its current shareholders, mainly State Bank of India (SBI). This was confirmed by Prashant Kumar, the managing director and chief executive, in an interview with ET. He also mentioned that Yes Bank is in discussions with potential investors to sell its stake.

Providing Exit for Shareholders

“Banks led by State Bank of India supported our reconstruction scheme. According to regulations, banks cannot hold stakes in other banks for too long,” said Kumar. “We need to offer an exit for our shareholders, especially SBI. Although I can’t give an exact timeline, it’s something we aim to do as soon as possible.”

Ongoing Discussions with Investors

Kumar confirmed ongoing discussions with potential investors as part of this process. “That is a continuous process,” he said. Reports indicate that Yes Bank is negotiating with several international investors to sell a majority stake in the lender.

Current Shareholders

Currently, SBI and other Indian banks own 33.74% of Yes Bank. In March 2020, SBI, Housing Development Finance Corp (HDFC), ICICI Bank, Axis Bank, Kotak Mahindra Bank, Federal Bank, Bandhan Bank, and IDFC First Bank collectively invested ₹10,000 crore in Yes Bank to prevent its collapse.

Successful Sale of Bad Loans

Kumar highlighted the successful sale of bad loans to JC Flowers, which proved beneficial for the bank. “This transaction has been extremely beneficial. In 18 months, we resolved over 50% of security receipts. Out of ₹6,800 crore of security receipts, ₹3,400 crore have been resolved, plus an additional ₹1,000 crore,” Kumar said. “The remaining receipts have a net carry value of just 0.4%.”

Future Plans for Security Receipts

Kumar expects to resolve another 25% of the remaining security receipts within the next 12 months. By the end of this fiscal year, the net carrying value of these receipts should be zero. JC Flowers ARC purchased NPA assets worth ₹48,000 crore from Yes Bank for ₹11,200 crore as of March 2022.

Expansion of Deposit Base

Yes Bank has also expanded its deposit base significantly, with total deposits growing to ₹2.6 lakh crore, marking a 20.8% increase year-on-year.

Digital Convenience and Customer Relationship

“The way we service our customer relationships and offer convenience through digital means is why we have better deposit growth than other banks,” Kumar said. “We plan to maintain this focus and continue growing faster than the market. We don’t have any plans for a special deposit scheme, and we have been able to keep our deposit costs stable.”

Kumar added that the bank expects to match industry peers in profitability within the next 12-18 months. For the June quarter, Yes Bank reported a net profit of ₹502.43 crore, a 47% increase from the previous year.

Addressing Legacy Issues

“There are legacy issues since the bank was not meeting its priority sector lending targets, and a large portion of our assets are in RIDF accounts. Our operating profit is steadily growing, and we have delivered strong net profit, but people compare us to competitors without considering where we started. In 12-18 months, we should be in line with the market on profitability,” he said.

Impact of RIDF on Net Interest Margins

Yes Bank has ₹44,000 crore stuck in the Rural Infrastructure Development Fund (RIDF), where yields are 2% lower than the current repo rate. It expects ₹11,000 crore to be released in November or December this year, which will positively impact its net interest margins.