Why Yes Bank Share Price is Rising

Majority of banking stocks have seen a rally following Finance Minister Nirmala Sitharaman's interim Budget presentation on 1 February 2024.

The surge in these banking companies has been underpinned by the robust performance of Public Sector Undertaking (PSU) banks.

This bullish momentum carried through as PSU bank stocks demonstrated a remarkable upswing, with a significant surge of up to 13% observed on Wednesday.

The Nifty PSU Bank index further solidified this trend, concluding the last session with a notable gain of almost 3%, reaching an impressive 6,743 points.

As the index touched another record high of 6,788 points, a clear bullish sentiment emerged, with 11 out of 12 constituents finishing the day's trade in positive territory.

Amid this rally in PSU banks, the ONLY private bank stock that has garnered attention is Yes Bank. Shares of Yes Bank hit over three-year high, surging 15% in intraday trade today.

Here's why.

#1 HDFC Bank's Stake Acquisition Approval

Shares of Yes Bank continued their winning run following the receipt of an intimation from the Reserve Bank of India (RBI) on 5 February 2024. The RBI approved HDFC Bank's acquisition of an aggregate holding of up to 9.5% of paid-up share capital or voting rights of Yes Bank.

In approving, the RBI stipulated a timeframe for HDFC Bank to acquire a major shareholding within one year from the date of the intimation letter. Failure to do so within this period would result in the cancellation of the approval.

Additionally, HDFC Bank is mandated to ensure that its aggregate holding in Yes Bank does not exceed 9.5% of the paid-up share capital or voting rights at any given time.

If the aggregate holding falls below 5%, prior approval of RBI will be required to increase it to 5% or more of the paid-up share capital or voting rights of the Bank.

As of 31 December 2023, HDFC Bank held a 3% stake in Yes Bank.

#2 RBI Meeting Boost

The surge in Yes Bank's stock can also be attributed to the optimistic atmosphere surrounding the Reserve Bank of India's (RBI) monetary policy meeting.

Anticipation of a dovish stance by the central bank, coupled with a decline in bond yields on Wednesday, fuelled heightened enthusiasm among investors.

As Indian government bond yields moved lower in early trades, the positive sentiment prevailed a day before the RBI's final monetary policy decision for the current financial year.

Investors were keenly awaiting guidance on banking system liquidity, encouraged by the RBI's actions, including two separate overnight variable rate reverse repo auctions conducted on Tuesday.

This aggressive withdrawal of cash from the system, along with the central bank's plans for a similar operation later in the day, contributed to the overall positive market sentiment, propelling Yes Bank's stock higher.

The Potential SBI Stake Sale

According to a media report released on 8 February 2024, the State Bank of India (SBI) is considering divesting its entire stake in Yes Bank, favouring a block deal for the sale. The bank is contemplating the sale of Yes Bank shares valued at Rs 50-70 bn through this mode.

Notably, there will be no lock-in period for SBI on the sale of Yes Bank shares. The SBI Board is anticipated to deliberate on the potential share sale in Yes Bank shortly, intending to utilize the proceeds to fortify balance sheet liquidity.

According to data, as of the end of the December quarter, SBI held 7.5 bn shares, constituting a 26.1% stake in Yes Bank.

The estimated worth of this stake stood at Rs 229 bn as of the latest Thursday's trade. The monetization of this stake is viewed as beneficial for SBI, particularly in light of pension-related provisioning made by the state-run Public Sector Bank (PSB) in the December quarter.

What Next?

Going forward, the bank's management has expressed confidence in an ambitious plan to enhance its net interest margin (NIM) by 1% over the next three years. This strategic approach involves attracting a greater volume of low-cost deposits while extending loans to clients offering higher yields.

Regarding customer engagement, Yes Bank is actively prioritizing the enhancement of digital experiences. As a part of this initiative, they have introduced user-friendly options for credit card applications.

This endeavour has proven successful, with a consistent 28% year-on-year growth in new card acquisitions and an impressive 51% year-on-year growth in consumer spending.

Additionally, the bank intends to concentrate on fostering relationships with selected high-quality corporates. Simultaneously, there is a plan in place to fortify the deposit base and reduce dependence on wholesale funding as part of the overall strategy for future growth and sustainability.

How Shares of Yes Bank have Performed Recently

The Yes Bank stock rose around 76% in the past one year. Over a month, the share price has gained by 24%.

Yes Bank share price touched its 52-week high price of Rs 32.7 on 8 February 2024. Its 52-week low was Rs 14.4 touched on 13 March 2023.

The company is currently trading at a PE multiple of 85.6 times and PB (price to book value) multiple of 2.1 times.

About Yes Bank

Yes Bank is a full-service commercial bank that offers banking solutions to retail, corporate, and small and medium-sized businesses (SMEs).

Yes Securities, the bank's wholly owned subsidiary, conducts investment banking and brokerage business.

It offers a comprehensive banking experience through an extensive branch banking network of over 1,000 branches and 1,800 ATMs.

The past history of Yes Bank may not paint a good picture, but things are changing. It remains to be seen whether Yes Bank regains its glory once again, like how it performed in 2018.

To know more about the company, check out Yes Bank's financial factsheet and its quarterly results on our website.

For a fundamental analysis of Yes Bank, check out the editorial - Is it Time to Say "YES" to this Bank?

You can also compare Yes Bank with its peers:

Yes Bank vs Federal Bank

Yes Bank vs Bank of Baroda

Yes Bank vs ICICI Bank

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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