SBI-Yes Bank Stake Sale: Brokerage Sentiment Mixed Despite SMBC Investment

Yes Bank Ltd. is on brokerages' radar after Japanese financial giant Sumitomo Mitsui Banking Corp. purchased a 20% stake in the mid-sized bank last week. State Bank of India divested a 13.19% share in the private lender for nearly Rs 8,890 crore.

Despite the development, Investec maintains a 'sell' call on the stock with a target price of Rs 17, and Morgan Stanley has an 'underweight' recommendation in the near term, at a target price of Rs 15. However, the latter sees the transaction as a positive for the banker on a medium-term basis.

SMFG India Credit (formerly known as Fullerton India) is an India-based non-bank finance company where the Japanese investor holds a majority stake. As of Dec. 31, SMFG India Credit had assets under management worth RS 53,100 crore. It had a capital adequacy ratio of 23.9% and a net non-performing asset ratio of 1.4%.

Investec notes that this deal marks the largest cross-border equity investment in the Indian banking sector. Further transactions will be a key monitorable, believes the brokerage, as the stake sale as of yet does not involve any change in management control and is also lower than the threshold required for a mandatory open offer.

The other lenders selling stakes to SMBC include HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank and Bandhan Bank.

The one-time profit observed by ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank in fiscal 2026 owing to the transaction accounts for 0.5% to 1.5%, while that for Federal Bank, IDFC First Bank, State Bank of India and Bandhan Bank stands at 3% to 6%, said Investec.

Morgan Stanley sees the bank's common equity tier 1 ratio at a relatively higher value of 13.5, which may contribute to its near-term sourness. The CET1 ratio determines the bank's capacity to tolerate financial distress by pitting its capital against risk-weighted assets.

Investec notes a minimal positive impact on SBI's CET1 from the transaction at 11 basis points, which is of note as the public lender's board recently approved a Rs 25,00 crore equity capital raise in fiscal 2026. The fundraise "is an enabling provision, but still a potential dilution risk," notes the brokerage.

Morgan Stanley also sees a similar improvement in SBI's CET 1 and predicts a benefit of around eight basis points in the same for Federal Bank. Other banks involved in the stake sale, according to the brokerage, will see a gain of five basis points or less.