Heena Sharma Blog

Newsflow around State Bank of India (SBI) stepping in to rescue the cash-starved YES Bank has triggered a fresh sell-off in the state-owned bank's counter. While YES Bank tanked 80 per cent in intra-day deals, SBI lost over 10 per cent. The developments have also cast a shadow on the listing of the bank's credit card arm - SBI Cards & Payment Services - which was expected to list at up to 50 per cent premium against the issue price. While analysts continue to remain bullish on SBI Cards from a long-term perspective given its healthy business outlook and huge penetration scope, the recent developments may have an impact on SBI Cards' listing. That said, they advise using the overhang to buy the stock for the long-term. "If YES Bank gets amalagamated with SBI, just like Global Trust Bank (GTB) with Oriental Bank of Commerce (OBC) back in 2004, then it will be negative for both YES Bank shareholders as well as SBI shareholders. SBI then would have to tak...

JP Morgan cut its target price for YES Bank on Thursday to Rs 1 per share, taking into account the potential fall in the lender’s net worth due to stressed assets. Macquarie Capital Securities also said if State Bank of India (SBI) decided to buy stake in the bank, they should buy it at Rs 1 per share as the net worth is hugely impaired. “ We believe forced bailout investors will likely want the bank to be acquired at near-zero value to account for risks associated with the stress book and likely loss of deposits. We think the bank will need to be recapitalised at nominal equity value and could test dilution of additional tier 1 (AT1) capital. We remain underweight and cut our target price to Rs 1 as we believe net worth is largely impaired,” JP Morgan said. Explaining its reasons for the meagre price for YES Bank shares, Macquarie said the bank has a net worth of Rs 25,000 crore. However, its BB and below rated loan portfolio is approximately Rs 30,000 crore and the BBB belo...