Now, as the private lender’s net worth is only 0 and has lack of clarity on the bank’s deposit franchise because of some solvency issues, Other banks like PSU and SBI need not to pay more than INR 1 to the Yes Bank stakes. Govt is now considering a SBI let consortium for taking over the lender.
On this, Macquarie analyst Suresh Ganapathy wrote- “YES Bank has a net-worth of around Rs 25,000 crore. Its below investment grade book (BB&Below) is around Rs 30,000 crore and BBB book is at around Rs 50,000 crore. If we assume substantial proportion of BB&below book is wiped off and say 10-15 per cent of BBB book is to be written off, it implies the current net-worth of the bank is zero (after factoring in 25 per cent tax benefits). Ideally and theoretically speaking, SBI and other PSU banks need to buy the bank at Re 1,”
Now, the cost of Bank’s stock of Yes bank has risen from 26 % to 37% per share for the developement that has increased the cost of buying the stakes of the bank to INR 1,900, Crore. However, the shares of SBI had fallen around 4 % after this news and traded to 3% higher at 293.
Ganpathy said- We are unsure of YES Bank’s quality of liabilities franchise which perhaps could have been further affected due to the current solvency issues. Consolidation would have brought about a lot of integration challenges as well as legal challenges as we believe SBI Act needs to be amended for SBI to acquire a private sector bank. Even in this case, the deal will require blessings of the regulator as well as the government,”