Mumbai: Share prices of cash-strapped Yes Bank may see a sharp downturn on Friday as the Reserve Bank of India has superseded its Board of Directors for a period of 30 days owing to serious deterioration in the financial position of the bank.
Rahul Sharma, Business Head at Equity99 said that investors may take short positions on Friday. A short position refers to a trading technique in which an investor sells a security with plans to buy it later.
"It's for sure that tomorrow, Yes Bank is going for a sharp fall," Sharma said.
On Thursday, its shares rose around 26 per cent on reports that the country's largest bank State Bank of India (SBI) may take up stake in Yes Bank.
On the BSE, shares of Yes Bank settled at Rs 36.85 on Thursday, higher by Rs 7.55 or 25.77 per cent from its previous close
Sharma further told IANS that public does not currently hold confidence with the current market scenario and sentiments are really week globally and in India, which keeps the outlook bearish.
Yes Bank depositors rush to ATMs but most unable to withdraw cash
Harried Yes Bank depositors rushed to ATMs to withdraw cash but faced multitude of problems including closed down machines and long queues, after the RBI placed the bank under a moratorium, capping maximum withdrawals at Rs 50,000 per account for a month.
Aggravating the problems of depositors were difficulties accessing the internet banking channel, which ensured that they can't transfer the funds online as well.
At an ATM in south Mumbai's Horniman Circle, with the RBI headquarters overlooking it, the shutters were pulled down.
The guard on duty said the machine was non-operational before he reported to work late in the evening and he was ordered to shut it after 2200 hrs.
In the residential area of suburban Chembur, one ATM was dispensing cash but had a long queue of anxious depositors.
One man said it was still possible to withdraw up to Rs 50,000 in multiple transactions from the machine.
However, another machine nearby had run dry within minutes of the RBI announcement, a woman said.
Read more:RBI caps withdrawals from Yes Bank at Rs 50,000
All may not be lost for Yes Bank but insiders say its recovery to be slow
All may not be lost for crisis-hit Yes Bank with banking industry insiders pointing out that the bank has heavy duty collateral against loans.
It will, therefore, depend on the acquiring bank or financial institution's capacity to hold the assets till the market improves and sell them later to recover sizeable chunk of the loans.
For instance, if collateral is a residential building, it may not fetch good price in a depressed market.
But given that some of the big financial institutions such as IL&FS and DHFL have collapsed in recent times, the market may not respond favourably to Yes Bank.
"This is the reason we expect revival of Yes Bank to be very slow," a Mumbai-based bank executive said.
Bailout of Yes Bank a depositor one: JP Morgan
The bailout of Yes Bank is "a depositor one - not an equity one", and the bailout will come at a large cut for equity holders, according to leading brokerage JP Morgan.
In a report on Yes Bank, it said the quasi-sovereign bailout (by SBI/LIC) "is a bond
holder/depositor bailout and not an equity one, and hence today's rally in the stock, where Yes Bank rose by 26 per cent compared to a flat Nifty is unjustified".
"The new capital will likely come in at a steep discount to current share price, as forced 'bailout' investors will likely want a large cut for equity holders and it remains to be seen if AT1 at the bank will be called for dilution, as such a move could have implications for future similar issuances by private banks," it said.
JP Morgan has cut the target price to Re 1.
"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 (3Q financials have still not been disclosed)," it said.
On the implications for the SBI being called for "national service", JP Morgan said these are incrementally negative for its valuations as it sets a precedent for nationalisation of any future private losses.
"Part of this is already captured in the sharp discount at which the stock trades versus private peers and we believe a crystallisation of such an event effectively makes the discount sticky for a long time. It remains to be seen if SBI/LIC will put up the recap money required," JP Morgan said in the note.
(IANS Report)
