Shares in India’s fifth-largest private sector lender Yes Bank tumbled 25% to their lowest in over a decade on Friday, after the central bank took control of the bank and limited withdrawals because of a serious deterioration in its financial position.
India on Thursday placed Yes Bank under a moratorium, with the Reserve Bank of India (RBI) taking over from its board for 30 days and saying it would work on a revival plan for the lender.
Moody’s said the moratorium was credit negative as it affects timely repayment of depositors and creditors, adding that the lack of a coordinated, timely action on the lender highlights continued uncertainty over bank resolutions in India.
“Effectively, Yes Bank should have no equity value left,” said Sandip Sabharwal, a Mumbai-based fund manager. “Ideally, trading should be suspended till formal restructuring is announced.”
State Bank of India, the country’s largest lender, said late Thursday that its board had given its in-principle nod to explore an investment in Yes Bank.
Shares of SBI tumbled 12% on Friday in their biggest intraday drop since October 2012 .
“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,” said JPMorgan analyst Saurabh Kumar, in a note, as it cut its price target on Yes Bank to 1 rupee ($0.0135) from 55 rupees a share.
