Sumitomo Mitsui In Talks To Buy 24% Stake In Yes Bank

Japan-based Sumitomo Mitsui Banking Corporation is in talks to acquire at least a 24% stake in Yes Bank Ltd., according to people familiar with the matter.

SMBC is part of the broader Sumitomo Mitsui Financial Group. The potential deal is likely to involve the State Bank of India, which is the largest single shareholder in the Indian private lender, the people told NDTV Profit.

The transaction will allow SMBC to eventually go for an open offer and acquire a majority stake in Yes Bank. While the deal has been in the works since last year, little progress was made after SMBC was not allowed to breach the 26% cap on voting rights. This was done to avoid any individual shareholder having too much power on the board.

According to a person in the know, the transaction will allow SMBC to have a stronger presence in India, beyond its three branches currently. Currently, SMBC also owns a majority stake in SMFG Credit India, a non-bank finance company previously called Fullerton India Credit Company.

The Yes Bank acquisition plan may also involve merging SMFG Credit into Yes Bank, which will further allow SMBC to raise its stake in the bank. These details are yet to be worked out, the people quoted above said.

To be sure, Sumitomo Mitsui Banking Corporation has not yet filed an application with the Reserve Bank of India for clearance in the Yes Bank stake sale. According to a person with direct knowledge of the matter, such an application is essential in this case since RBI allows stake buys up upto 4.99% only in the case of Indian banks.

Any stake buy-up to 9.99% in a bank will require specific RBI approvals. For an investor to buy 10% or more in a bank, further clearance from the central bank would be crucial, the person quoted above said. SMBC might approach the regulator at a later stage, after the terms of the deal are finalised with SBI, the people quoted above said.

If a deal is finalised, SBI will likely be able to exit Yes Bank five years after it originally stepped in. During a financially turbulent period for Yes Bank in March 2020, the Reserve Bank of India initiated a reconstruction plan for the lender. As part of the plan, a clutch of private sector lenders led by SBI invested Rs 10,000 crore worth of equity in Yes Bank to stabilise operations.

Since then, some of the lenders have exited their investment. However, SBI continues to hold around a 24% stake in the private bank.

As of March 31, Yes Bank's advances stood at Rs 2.46 lakh crore, while the deposits were at Rs 2.84 lakh crore. Its return on equity for the fiscal 2024-25 was at 5.2%, up from 3% a year ago. Return on assets improved to 0.6%, from 0.3% a year ago. Gross non-performing asset ratio for the lender was flat at 1.6%, while net NPA ratio fell to 0.3%.