Shares of Yes Bank Ltd surged over 1000% from their lifetime low in seven sessions, mostly after State Bank of India, along with eight lenders, agreed to a bailout package for the private lender.
The stock had hit a life time low of ₹5.50 a share on 6 March and since then it has surged 1001%. The scrip on Tuesday was trading at ₹61.15 on NSE, up 61% from its previous close.
On Monday, the Reserve Bank of India assured all Yes Bank’s depositors that their money is in safe hands and there is no reason to withdraw cash in panic. The assurance comes ahead of the lifting of a moratorium on Yes Bank at 6 pm on Wednesday.
After the restructuring and RBI assurance, rating firm Moody’s Investors Service upgraded its rating for the lender with a positive outlook.
“We believe that the current moratorium on deposit withdrawal and capital infusion are just a first step toward the revival of Yes Bank and thus avoid systemic risk for the entire financial sector and economy in current testing times,” said Emkay Research in a note to its investors.
“Sustainable revival of Yes Bank will need much more steps, including continued capital support, strategy to contain deposits run-down (including RBI liquidity support), stripping/sale of assets to create in-house liquidity, accelerated recognition/provisioning of corporate stress, stricter supervision/compliance and last but not the least – support from the economy. Thus, we believe that it will be long battle for Yes Bank to survive and thrive independently,” Emkay added.
On 13 March, the government approved a rescue plan for Yes Bank backed by State Bank of India. Under the plan, domestic investors including SBI, HDFC Ltd, ICICI bank Ltd, Kotak Mahindra Bank Ltd, Bandhan Bank Ltd, Federal bank Ltd and IDFC First bank have committed to invest ₹11,200 crore into the bank.
Yes Bank on Saturday reported a record loss of ₹18,564 crore in the quarter ended 31 December, 2019 owing to a sharp jump in bad loans and higher provisioning. Provisions for the quarter stood at ₹24765 crore. GNPA as a percentage of total loans soared to 18.87% from 7.39% a quarter ago. Net NPA as a percentage of total loans stood at 5.97% compared to 4.35% last quarter.
“(With weak earnings and capital infusions by many lenders) we think Yes Bank will remain on life support for a long time and is clearly not out of the woods. We hence suspend coverage of the stock,” said Nomura Research in a note to its investors.
“We have seen no private interest so far in the bank and given the deterioration in the business, banks/RBI will have to continue to provide both liquidity and capital to the bank”, Nomura Research added..