“We have seen no private interest so far in the bank (YES) and given the deterioration in the business, banks/RBI will have to continue to provide both liquidity and capital to the bank,” say analysts at Nomura.
Source: Capitaline; compiled by BS Reseach Bureau
The larger debate is whether it was appropriate for peers to have bailed it out. “The intention is also to protect their own interest,” says Ajay Bodke, CEO and chief portfolio manager, Prabhudas Lilladher. “But still, this is a large cheque to write for these lenders, especially when business is turning tough even for these lenders and capital for the system is getting expensive,” he adds.
In this context, Lalitabh Shrivastawa of Sharekhan feels that if these sums were retained by the banks, it would have certainly made a positive difference to their financials. Concerns expressed by analysts largely stem from the fact that growth has been on a slow-mode and barring ICICI Bank, asset quality pressures haven’t quite eased for these lenders.
In addition, Shriram Subramanian, MD, InGovern, says the decision to invest in YES Bank by its peers could have been done more consultatively engaging shareholders as well. “None of the investee banks had an opportunity to do due diligence on YES Bank and I don’t think some of these banks would have participated in the capital-raising process if left to themselves,” he explains.
Experts say such decisions are detrimental to shareholders’ interest and at a time when banking stocks are at the fore-front of the market correction, they could further weaken sentiments. Stocks of these lenders were down between 5.9 per cent – 11 per cent on Monday.
Compiled by BS Research Bureau