Shares of YES Bank witnessed selling pressure in early trade on Monday as the three year lock-in for equity investors under the restructuring ends today. With the expiry of the lock-in period for shares, individual investors will get an opportunity to sell their shares after a long wait, while the State Bank of India (SBI) may also trim its stake in the bank. Besides, three years lock-in of other shareholders such as Axis Bank, ICICI Bank, IDFC First Bank, HDFC Bank, is also expiring on March 13, 2023.

In a separate development, Supreme Court on Friday put on hold Bombay High Court's ruling on writing down AT-1 bonds, a move which is likely to provide some respite to the lender. In January this year, the Bombay High Court quashed YES Bank’s March 2020 decision to write off ₹8,415 crore of additional tier 1 (AT1) bonds as part of the bailout plan, citing that the Administrator did not have the authority to take such a decision. The decision was challenged by YES Bank and Reserve Bank of India in the Supreme Court.

Extending fall for the third straight session, YES Bank share price opened marginally lower at ₹16.82 against Friday’s closing price of ₹16.86 on the BSE. In the opening trade, the banking stock fell as much as 3% to ₹16.35, while the market capitalisation stood at ₹48,221 crore. The counter has fallen nearly 11% in the last three sessions.

At the time of reporting, YES Bank shares were trading 0.5% higher at ₹16.95, paring early losses.

According to analysts, YES Bank shares are likely to face selling pressure in the next few sessions as retail investors may rush to sell their shareholding in the private lender, while SBI and other banks may not offload their entire stake at random.

“It is premature to speculate how various banks having exposure to the YES Bank will decide their future course of action. Since they made these strategic investments in YES Bank during moratorium period to bail it out from the crisis, they will watch and take decisions in regard to whether to continue their stakes or not,” says Kranthi Bathini from WealthMills Securities.

As at the end of the December quarter of 2022, 76.73% stake in YES Bank was held by Domestic Institutional Investors (DIIs) and public shareholders that include SBI and other banks, while Foreign Institutional Investors (FIIs) owned 23% holdings. Among banks, SBI is the largest shareholder with a 26.14% stake, followed by HDFC Ltd (3.48%), ICICI Bank (2.61%), Kotak Mahindra Bank (1.32%), and IDFC First Bank (1%). Among others, LIC holds 4.34% shares in the lender, while foreign institutional investors Ca Basque Investments and Verventa Holding together own 13% shares in YES Bank.

YES Bank shares are currently down 34% from its 52-week high of ₹24.75 touched on December 14, 2022, while it hit a 52-week low of ₹12.11 on March 30. 2022. The private lender has given 35% returns to its shareholders in the last one year, while it lost momentum in the last six months, giving a muted return of 2% during the said period. On a year-to-date (YTD) basis, YES Bank shares have fallen 21% as investors resorted to profit booking ahead of expiry of the lock-in period.

In the recently concluded December quarter of 2022 (Q3 FY23), YES Bank reported an 80% year-on-year drop in its net profit, dragged down by ageing related provisions. Net profit stood at ₹52 crore during the third quarter of the current fiscal compared with ₹266 crore in the year-ago period. The lender’s non-tax provisions jumped 125% year-on-year to ₹845 crore. The net interest income (NII) — the difference between the interest income from lending and that paid to depositors — rose 11.7% year-on-year to ₹1,971 crore in Q3, while the net interest margin rose 10 basis points YoY to 2.5% in Q3 FY23. On the asset quality front, gross non-performing assets (GNPAs) improved to 2% during the third quarter from 12.9% in Q2 FY23. Net non-performing assets too declined to 1.03% from 3.6% in the previous quarter.

The lender also raised ₹8,900 crore in the third quarter from private equity investors. It also appointed Sunil Kaul of PE firm Carlyle and Shweta Jalan of Advent International as additional directors onto the board. In December 2022, the Reserve Bank of India (RBI) had given conditional approval to private equity investors Carlyle Group and Advent International to acquire up to 9.99% each in private lender Yes Bank.

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