Back from the brink: Yes Bank says SMBC stake buy creates room for rating upgrade

Mumbai: Japanese lender Sumitomo Mitsui Banking Corporation’s (SMBC) acquisition of nearly 25 per cent stake in Yes Bank is a strong vote of confidence and could open doors for a potential rating upgrade, Yes Bank Managing Director and CEO Prashant Kumar said.

The Rs 16,000-crore investment from the global financial institution is strategic, helping Yes Bank raise capital, expand business through network tie-ups, and enhance profitability. “With a strategic investor and the ability to raise capital, the possibility of a rating upgrade is there,” Kumar said. The bank’s rating has already improved to ‘AA-’ from ‘D’ over the last five years.

Kumar, who was brought in March 2020 to steer Yes Bank’s revival after the Rana Kapoor-led crisis, noted the bank has transformed from near collapse to attracting large foreign investment.

In 2020, SBI and other banks rescued Yes Bank by taking a 79 per cent stake. SBI continues to hold over 10 per cent, adding confidence for capital raising.

The SMBC stake, which brings two board seats, is expected to help Yes Bank secure fee-based business from corporate borrowers of the Japanese lender and their supply chain companies.

Kumar said operational changes will be discussed with SMBC, though no specific initiatives have been announced.

The bank plans to exit FY27 with a return on assets of 1 per cent, up from 0.8 per cent currently, focusing on profitability and lending segments with higher net interest margins such as used car finance and affordable loans.

Net interest margins are expected to bottom in September quarter but rise from Q3, targeting 2.7 per cent by FY26-end.

Responding to investor concerns over share price performance, Kumar urged patience, noting the bank’s unique recovery journey. He also dismissed concerns over the small business loan book, stating no reversals are anticipated. Agencies