Shares of Yes Bank surged nearly 10% on Tuesday, May 6, 2025, driven by reports that Japan's Sumitomo Mitsui Banking Corporation (SMBC) is in advanced negotiations to acquire a majority stake in the private lender. The news sent Yes Bank shares up 9.65%, reaching a high of ₹19.44 on the Bombay Stock Exchange (BSE), while its market capitalization climbed to ₹57,200 crore.
The potential acquisition could see SMBC looking to secure up to a 51% stake in Yes Bank, marking what would be a significant move in the Indian banking sector. If finalized, this deal would represent SMBC's largest investment in India to date, surpassing its $2 billion purchase of a 74.9% stake in Fullerton India Credit in 2021.
According to sources familiar with the matter, senior SMBC executives held meetings in Mumbai last week with key shareholders of Yes Bank, including representatives from the State Bank of India (SBI), which currently owns a 23.97% stake in Yes Bank. SBI is reportedly considering selling up to 20% of its holding in the bank as it seeks to capitalize on the turnaround Yes Bank has experienced since its rescue in 2020.
Yes Bank has made a remarkable recovery from the brink of collapse, with total deposits soaring to ₹2.85 lakh crore in FY25, nearly tripling since March 2020. The bank's gross non-performing assets (NPAs) have decreased to 1.6%, down from a staggering 16.8% at the height of the crisis, while net NPAs have dropped to 0.3% from 5%.
In its latest earnings report released on May 3, 2025, Yes Bank reported a net profit of ₹2,406 crore for the financial year, a 93% increase from the previous year. This turnaround is a stark contrast to the loss of ₹16,418 crore recorded in FY20. The bank's net interest margin (NIM) remained stable at 2.4% in FY25, up from 2.2% in FY20.
During an analyst call following the earnings report, Yes Bank's CEO and Managing Director, Prashant Kumar, expressed optimism about the bank's growth trajectory. He indicated that the bank expects reasonable growth in retail assets as it continues to improve its core operating metrics.
However, amid the excitement over the potential acquisition, Yes Bank issued a clarification regarding the discussions with SMBC. The bank stated that these discussions are preliminary and do not warrant a disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Yes Bank emphasized that the information regarding these talks is speculative and not factually correct at this time.
Despite the clarification, the market reacted positively to the news, with Yes Bank shares opening 8.5% higher at ₹19.24 on Tuesday morning. The stock's trading volume was significantly higher than the two-week average, with around 3.07 crore shares changing hands on the BSE.
Yes Bank's stock has seen a volatile year, having touched a 52-week high of ₹27.41 on July 8, 2024, and a low of ₹16.02 on March 12, 2025. The bank's shares have delivered a negative return of around 25% over the past year, while it has gained approximately 8% in the last month alone.
Market analysts are closely monitoring the situation, as the proposed acquisition could trigger an open offer for an additional 26% stake in Yes Bank, potentially leading to SMBC acquiring a controlling interest. This move would mark a significant shift in the ownership landscape of Indian private banks, with SBI and SMBC as the major stakeholders.
In addition to SBI’s stake, other domestic entities, including Kotak Mahindra Bank, Axis Bank, and ICICI Bank, collectively hold 11.34% of Yes Bank. Private equity funds Advent International and Carlyle hold 9.2% and 6.84% of Yes Bank, respectively, as of March 2025.
The Reserve Bank of India (RBI) is reportedly open to exploring alternative deal structures that would allow SMBC to gain a controlling economic interest in Yes Bank while adhering to regulatory caps on foreign ownership. Although individual foreign ownership is capped at 15% and total foreign shareholding in private banks at 74%, the RBI has made exceptions in the past under specific circumstances.
As discussions progress, the future leadership of Yes Bank may also be in play. With CEO Prashant Kumar's term set to end in October 2025, a successful acquisition could lead to SMBC recommending a new candidate for the top position, subject to RBI approval.
The ongoing negotiations and the potential acquisition of Yes Bank by SMBC are seen as a pivotal moment for the bank, which has worked to restore its credibility and financial health since its near-collapse in 2020. With a solid growth trajectory and improving asset quality, Yes Bank is positioning itself as a viable player in India's rapidly evolving banking landscape.
As the situation unfolds, investors and market watchers will be keen to see how this potential deal develops and what it could mean for the future of Yes Bank and the broader banking sector in India.
