Shares of Mumbai-based private lender Yes Bank Ltd. surged as much as 9% on Tuesday, May 6, 2025, following reports that Japan's Sumitomo Mitsui Banking Corporation (SMBC) has received the approval from the Reserve Bank of India (RBI) to acquire a 51% stake in the lender. This news, first reported by Mint, has sent positive ripples through the market, indicating a potential turnaround for the beleaguered bank.
According to sources familiar with the development, the deal may value Yes Bank at approximately $1.7 billion. Under the terms of the agreement, SMBC might either purchase less than a 26% stake and facilitate a merger through a share swap or acquire up to a 26% stake, which would trigger an open offer for additional shares. This strategic move marks a significant step for SMBC, as it seeks to establish a stronger foothold in India’s banking sector.
Yes Bank, which has nearly 62 lakh small retail shareholders holding a 22.55% stake, has been under the watchful eye of regulators and investors since its near-collapse in 2020. The bank was rescued by a consortium of lenders led by the State Bank of India (SBI) after the RBI superseded its board due to severe liquidity issues. Since the exit of its founder and CEO, Rana Kapoor, in 2019, Yes Bank has been operating without a promoter.
In early trading on Tuesday, shares of Yes Bank were reported at ₹19.24, reflecting an 8.5% increase. However, the stock remains far from its 52-week high of ₹27.44, indicating that while the news has sparked investor interest, there is still a long way to go for the bank's recovery.
As per the shareholding pattern from March, SBI holds a 24% stake in Yes Bank, followed by other major lenders including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, and LIC. Vervanta Holdings Ltd. holds a 9.2% stake, while CA Basque Investments has a 6.84% stake in the lender.
In addition to the 51% stake acquisition, SMBC is also in talks to buy at least a 24% stake in Yes Bank, as reported by NDTV Profit. This potential transaction is expected to involve SBI, the largest single shareholder in the Indian private lender. If finalized, it could facilitate SMBC's plans for an open offer and potentially lead to a majority stake acquisition.
The discussions have been ongoing since last year, but progress was initially stalled due to restrictions preventing SMBC from breaching the 26% cap on voting rights. This cap is in place to avoid any single shareholder gaining excessive control over the bank's board.
SMBC's interest in Yes Bank aligns with its broader strategy to expand its presence in India, where it currently operates three branches. The Japanese lender also owns a majority stake in SMFG Credit India, a non-banking finance company, and there are plans to potentially merge this entity with Yes Bank, further enhancing its stake.
If the deal proceeds, it would enable SBI to exit Yes Bank five years after its initial intervention during the bank's financial crisis in March 2020. At that time, the RBI initiated a reconstruction plan for Yes Bank, which involved a significant capital infusion of ₹10,000 crore from a group of private sector lenders led by SBI to stabilize the bank's operations.
As of March 31, 2025, Yes Bank reported advances of ₹2.46 lakh crore and deposits of ₹2.84 lakh crore. The bank's return on equity for the fiscal year 2024-25 stood at 5.2%, an improvement from 3% the previous year, while its return on assets rose to 0.6% from 0.3% a year earlier. The gross non-performing asset (NPA) ratio remained steady at 1.6%, but the net NPA ratio saw a decrease to 0.3%.
As the situation develops, the market will be closely watching the outcome of these negotiations and the implications for Yes Bank's future. The potential acquisition by SMBC represents not only a significant investment in the Indian banking sector but also a crucial step in the ongoing recovery and stabilization of Yes Bank.
The dynamics of this deal reflect broader trends in the financial sector, where foreign investments are increasingly seen as a pathway to revitalizing struggling banks. As Yes Bank continues to navigate its recovery, the support from established international players like SMBC could prove vital in restoring confidence among investors and customers alike.
In conclusion, the approval of SMBC's acquisition plans marks a pivotal moment for Yes Bank, signaling a possible resurgence for the lender that has faced significant challenges in recent years. With the backing of a major international bank, Yes Bank may be on the path to reclaiming its position in India's competitive banking landscape.
