Yes Bank ... one of the top five private lenders in the country over the past 10 years gains from Rs 14 to Rs 404 (high) on strong robust earnings...
But in a short span of just 17 months, the shares of Yes Bank have fallen from its lifetime high of Rs 404 in August, 2018 to a low of Rs 16.60 today at market closing.
Here is the reasons
On September 19, 2018: RBI refuses to give Yes Bank CEO Rana Kapoor an extension to his term. The apex bank asks Kapoor to step down by end of January 2019
November 27: Rating agency Moody's cuts bank's foreign currency issuer rating; changes outlook to 'negative' from 'stable' citing concerns over corporate governance
But in a short span of just 17 months, the shares of Yes Bank have fallen from its lifetime high of Rs 404 in August, 2018 to a low of Rs 16.60 today at market closing.
Yes bank from 400 to 16. Click the image to enlarge
Here is the reasons
On September 19, 2018: RBI refuses to give Yes Bank CEO Rana Kapoor an extension to his term. The apex bank asks Kapoor to step down by end of January 2019
November 27: Rating agency Moody's cuts bank's foreign currency issuer rating; changes outlook to 'negative' from 'stable' citing concerns over corporate governance
January 24, 2019: Yes Bank hires the head of Deutsche Bank India, Ravneet Gill, as its new CEO.
February 13: Yes Bank says RBI observed no divergences from RBI norms in the bank's asset classification and provisioning
April 8: Yes Bank says it will consider raising funds by issuing shares and debt securities.
April 26: Rising levels of bad loans trigger Yes Bank's first-ever quarterly loss; stock tanks 30% on next trading day
May 14: RBI appoints former central bank Deputy Governor R. Gandhi as additional director to Yes Bank's board - a rare move signalling an increased level of scrutiny on the lender
July 17: Yes Bank reports 91% drop in first-quarter profit, as provisions surge and asset quality deteriorates sharply; gross bad loan ratio stood at 5.01%
September 10: Yes Bank CEO Gill says lender is close to securing a deal to sell a minority stake to a global technology company to help boost its capital
October 3: CEO Gill says bank is in talks with private equity firms, strategic investors and family offices to raise additional capital
October 31: Yes Bank gets binding investment offer of $1.2 billion from global investor, sends stock 39% higher
November 1: Yes Bank reports bigger-than-expected loss for the second quarter, as bad loan ratio deteriorates to 7.39% and provisions swell to 13.36 billion rupees
November 29: Yes Bank says it aims to raise up to $2 billion in a massive issue of new shares to institutional investors and family offices; says it is in talks to sell shares worth $1.2 billion to Canadian investor Erwin Singh Braich and Hong Kong-based SPGP Holdings, which he backs
January 10, 2020: Yes Bank rejects Braich's investment, says will launch a $1.4 billion share sale, after a board member's resignation casts more doubt on the lender's future
February 12: The lender says it will delay disclosing its October-December earnings by at least a month, and that it was in talks with potential investors for a cash infusion
February 12: Bank says it received non-binding expressions of interest from JC Flowers, Tilden Park Capital Management, OHA (UK) and Silver Point Capital.
The scam ..
The former chairman of the bank is accused of receiving kickbacks in exchange of loans, many of which turned NPAs
The Enforcement Directorate (ED) on Sunday arrested Yes Bank’s former Chairman and founder Rana Kapoor on charges of money laundering. The arrest, under the Prevention of Money Laundering Act, comes after 30 hours of intense questioning. Kapoor is accused of receiving kickbacks from various corporate entities on disbursal of loans.
The Enforcement Directorate (ED) arrested Yes Bank promoter Rana Kapoor after 30 hours of questioning. Rana Kapoor was arrested in a money laundering case related with Dewan Housing Finance Corporation Ltd (DHFL). According to Enforcement Directorate, Yes Bank had provided a loan of Rs 3,750 crore to DHFL and another loan of Rs 750 crore to RKW Developers, a firm controlled by DHFL. ED further suspects that Rana Kapoor's Doit Urban Ventures received Rs 600 crore as kickbacks from the scam-hit DHFL for loans worth Rs 4,450 crore granted by Yes Bank.
Rana Kapoor bought Priyanka Gandhi's painting for Rs 2 crore
The Income Tax Department is investigating whether there is a link between Yes Bank founder Rana Kapoor and Congress' Priyanka Gandhi. Sources indicate that Rana Kapoor has close links with the Gandhis. Rana Kapoor had allegedly bought a painting by Priyanka Gandhi for a whooping Rs 2 crore. Earlier, Rana Kapoor was questioned for almost 30 hours by the enforcement directorate and was later arrested by ED in a money laundering case related with Dewan Housing Finance Corporation Ltd (DHFL).
Why to rescue ??
Source : Various Research Channels
The collapse of a bank means loss of trust of depositors in the financial system. The Indian banking system is the largest source of funding to the corporate sector, whereas the bond market is very well developed globally for companies to raise resources. The new generation YES Bank was finding it difficult to get back to health even after the RBI shunting out its founder and former chief executive Rana Kapoor
Who is helping out ?
RBI's five-page draft scheme clearly says that SBI expressed willingness to invest in YES Bank; this is probably first time that the state-owned lender, with Rs 34 lakh crore assets size, came forward to bail out a new generation private bank
YES Bank's stock price is currently trading at Rs 16 per share, 0.15 times its book value. The SBI would be paying only Rs 10 per share. Notably, this is for the first time that a bank is holding a majority stake in another bank, which has been possible under a special restructuring
The bank needed anywhere between Rs 10,000 to Rs 12,000 crore to meet the regulatory requirement and grow the bank
This implies that the new value of Yes Bank will be Rs 24,000 crore and SBI-led consortium will have to invest at least Rs 11,760 crore to own 49 per cent stake
Under the restructuring scheme, the bank's equity capital will expand from the existing 231 crore share of face value Rs 2 each to 2,400 crore shares of face value Rs 2 each. The SBI has to cough up Rs 11,760 crore for a 49 per cent stake at Rs 10 per share, which also includes a premium of Rs 8 per share.
"The Authorised Capital shall stand altered to Rs 50,00,00,00,000 (Rupees five thousand crore only) and number of equity shares will stand altered to 24,00,00,00,000 (two thousand four hundred crore only) of Rs 2 (Rupees Two only) each aggregating to Rs 48,00,00,00,000 (Rupees four thousand eight hundred crore only)," stated the RBI.
The RBI has carefully called the SBI an "investor" in a restructured bank (YES Bank). The restructuring scheme says the investor bank will not reduce its holding below 26 per cent before the completion of three years from the date of fund infusion.
Burden for State bank of india
While the SBI is far better than other PSBs in terms of performance, the largest state-owned bank is also passing through difficult times. The bank made a loss of Rs 6,547 crore in 2017-18. Its net profit was Rs 862.23 crore in 2018-19. The current year 2019-20 is looking better with over Rs 10,000 crore worth profit till December 2019 but the YES Bank rescue will surely put some burden