Yes Bank shares surge after SMBC announces ₹13,483 crore stake buy, marking biggest cross-border banking deal in India

YES Bank saw its share price jump as much as by 8.7% in early morning trade on Monday after Japan’s Sumitomo Mitsui Banking Corp (SMBC) signed a definitive agreement to acquire a 20% equity stake in the private lender for ₹13,483 crore ($1.6 billion). The SMBC deal marks the largest cross-border investment in India’s banking sector to date.

YES Bank’s stock touched an intraday high of ₹21.74 on the BSE, while gaining 8.39% to ₹21.70 on the NSE, lifting the lender’s market valuation by over ₹1,400 crore, at its peak. The scrip’s rally was pushed largely due to investor optimism over the foreign capital infusion and strategic credibility that SMBC’s entry brings to the Mumbai-based bank.

However, gains moderated through the session. As of 12:14 pm IST, YES Bank shares had pared most of the early rally, trading up by 2.2% at ₹20.46.

The stake sale—announced Friday—will see State Bank of India (SBI) offload 13.19% of its stake for ₹8,889 crore, while a consortium of seven other Indian banks, including ICICI Bank , HDFC Bank , Axis Bank and Kotak Mahindra Bank , will jointly dilute 6.81% for ₹4,594 crore. SBI and these lenders had rescued YES Bank under the RBI-led reconstruction scheme in March 2020.

SMBC is one of Japan’s largest and most prominent commercial banks, with its headquarters in Tokyo. A core unit of the Sumitomo Mitsui Financial Group (SMFG), SMBC offers a wide range of financial services< including corporate banking, project finance, retail banking, and global trade solutions.

After the deal, SMBC will emerge as YES Bank’s single largest shareholder, signalling long-term commitment and strategic interest from Japan’s second-largest bank by assets. Market participants view the deal as a potential pivot point for YES Bank, an entity which for years had struggled with concerns over quality of its banking assets. The bank has been plagued also with corporate governance issues in recent years. Analysts say, the SMBC deal could prove pivotal in improving the bank’s standing amongst its peers.

The share’s rally and the investor optimism notwithstanding, profit booking and cautious sentiment around broader markets could also be reasons behind the scrip’s pullback during the intraday trading.

The transaction is subject to regulatory approvals and is expected to close in the coming months.