Yes Bank Share Price Falls 85% Intraday. What Brokerages Are Saying

Shares of Yes Bank Ltd. fell as much as 84.65 percent intraday to Rs 5.65 apiece—the lowest on record—but pared some of the losses to traded 51.63 percent lower at Rs 17.80. The S&P BSE Sensex fell 1,450 points and NSE Nifty 50 slipped below 10,900.

This, after the Reserve Bank of India on Thursday evening superseded the board of the lender and imposed curbs on its operations for a month. Barely hours later, SBI in an exchange filing said its board has given an in-principle approval to look at an investment opportunity in Yes Bank.

The central bank has ordered Yes Bank to not make any payments for its liabilities, according to a statement. It also curbed withdrawals at Rs 50,000 and up to Rs 5 lakh under certain emergencies. Yes Bank has been prohibited from making any loans, investments, payments, or transfer any properties.

Bloomberg had on Thursday morning reported that the government has stepped in to organise a rescue plan for the Ravneet Gill-led bank. SBI has been selected to lead a consortium that will inject fresh capital into the country’s fourth largest private lender, the report said, citing people familiar with the matter.

SBI, however, said no such negotiations/events took place.

To be sure, Yes Bank has struggled to raise capital to offset a surge in bad loans. Gill made fundraising a priority since taking over as chief executive officer from co-founder Rana Kapoor, but his attempts have largely come a cropper.

NSE Puts Restrictions On Yes Bank

The National Stock Exchange on Friday put restrictions on Yes Bank shares in various segments, including futures and options.

The categories placed under restriction include debt, securities lending and borrowing scheme, currency derivatives, commodity derivatives, futures and options, according to a notification by the exchange. "Due to the recent developments in Yes Bank, it has been decided that no fresh or renewal of bank guarantees and fixed deposit receipt issued by the bank will be accepted.”

The existing benefit provided to members towards bank guarantees and fixed deposit receipt issued by Yes Bank in favour of NSE Clearing Ltd, shall also be reduced, it added.

So, what’s next for the lender? Brokerages weigh in with their views:

Moody’s Investors Service

“RBI’s moratorium on Yes Bank is credit negative as it affects timely repayment of bank depositors and creditors,” Alka Anbarasu, vice-president and senior credit officer (financial institutions) at Moody’s Investors Service, said.

While the credit rating agency expects Indian authorities to take steps to prevent the weakness in the bank’s viability from significantly impacting its depositors and creditors, the lack of a coordinated and timely action highlights continued uncertainty around bank resolutions in India, she said.

UBS

• Believe downside scenario of fair value of Re 1 is playing out.
• See two possibilities: capital infusion by government/PSU or initial investments from government/PSU and fund raising from markets later.
• This event could heighten risk perception of smaller/weaker banks in near term.
• Maintained ‘Sell’ with a price target of Rs 20.

Macquarie

• Contagion risk emanating from the collapse of the bank has been contained.
• Expect sharp downward move in stocks of Yes Bank and SBI.
• Don’t think capital infusion by PSU could infuse any confidence.
• Maintained ‘Underperform’ with a price target of Rs 25.

JPMorgan

• Net worth of Yes Bank is largely impaired, remain underweight, target cut to Rs 1.
• For SBI, being called for “national service” is incrementally negative for its valuations as it sets a precedent for the nationalisation of any future private losses.
• Maintained ‘Underweight’; cut price target to Re 1 from Rs 55.

Credit Suisse

• Delay in Yes Bank resolution to impact liquidity flows to other mid-sized private banks.
• This would also likely further aggravate the credit crunch in the economy and could accelerate a second wave of stress for the system..
• While SBI multiples are likely to remain depressed, within the sector it is likely to remain a safe haven for liquidity..

Citi

• Assuming Yes Bank’s current tier 1 is used for existing stress, further Rs 27,000 crore of capital will be needed to recapitalise the bank.
• Impact on SBI’s net worth will be 6 percent if it has to recapitalise 50 percent of Rs 27,000 crore of recap requirement for Yes Bank.
• Stake buy by SBI, others will be better as this will not have integration issues.
• While RBI works on this rescue plan, there could be uncertainty on liability inflows for small/mid-sized banks and NBFCs.
• Fast clarity is critical from a system perspective.

Morgan Stanley

• A swift resolution is important.
• Potential delays could impact the resolution of stressed loans and/or increase the ongoing credit crunch in the system.
• RBI has said that depositors' interest will be fully protected, which is a positive from a systemic risk perspective.
• See a significant increase in risk of our bear case scenario playing out.
• Maintained ‘Underweight’ with a price target at Rs 25.