YES Bank shares may see sharp fall after RBI puts cap on withdrawals

Mumbai: Shares of private lender YES Bank are likely to open sharply lower on Friday after the Reserve Bank of India superseded the Board of Directors and imposed a moratorium for a month.

The central bank has promised to come up with a credible restructuring plan in the next few days that may involve merging it with another lender. RBI also assured the depositors of the bank that their interest will be fully protected and there was no need to panic.

The RBI order came into effect from 6 pm on Thursday and the moratorium will be in place till April 3.

“It (YES Bank) seems to be another PMC Bank. The stock will crash on Friday morning. Also, any bank showing signs of trouble will see flight of deposits,” said Independent Market Analyst, Ambareesh Baliga.

As per the RBI notification, the bank cannot pay depositors more than Rs 50,000 during the moratorium period.

“The step is to ring fence the risks to the depositors. The idea is to avoid the run on the bank. It is more likely than not that they will have to reconcile with serious erosion in value,” said Ajay Bodke, CEO-PMS at Prabhudas Lilladher.

RBI in a notification said that the financial position of YES Bank has undergone a steady decline largely due to inability of the bank to raise capital.

“The bank has also experienced serious governance issues and practices in recent years, which have led to steady decline of the bank.

The central bank said the bank management had indicated to the central bank that it was in talks with various investors and they were likely to be successful. The bank was also engaged with a few private equity firms for exploring opportunities to infuse capital as per the filing in stock exchange dated February 12.

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“These investors did hold discussions with senior officials of the Reserve Bank, but for various reasons eventually did not infuse any capital,” RBI said.

“After taking into considering these developments, the Reserve Bank came to the conclusion that in the absence of a credible revival plan, and in public interest and the interest of the bank’s depositors, it had no alternative but to apply to the Central Government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949,” the central bank said.

Earlier in the day, ET NOW reported that SBI and LIC are set to pick up 49 per cent stake in YES Bank by acquiring preferential shares in the private lender at Rs 2 per share. The two state-run firms will acquire the stake for Rs 490 crore, the report added. SBI will likely be given exemption from open offer.

Meanwhile, JPMorgan on Thursday cut its target price on YES Bank to Re 1.

“We believe the forced bailout investors will likely want the bank to be acquired at near zero value to account for risks associated with the stress book and likely loss of deposits,” JP Morgan analyst said in a note, while maintaining their underweight rating on the stock.

“We remain underweight and cut our target price to Re 1 as we believe net worth is largely impaired,” they added.

Meanwhile, YES Bank’s net banking facility could not be accessed on Thursday evening. The lender attributed this to heavy traffic load on its website.

YES Bank’s scrip earlier in the day jumped 25.77 per cent to close at Rs 36.85 on BSE.

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