Bank shares in focus: SBI, IOB, Axis, HDFC Bank rally up to 5%; here's why

SBI, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank have announced a combined sale of their 20% stake in Yes Bank to Japan's SMBC

Banking shares price movement today: Bank shares, including private sector as well as public sector banks (PSBs), are in focus with Nifty Bank surging 3 per cent on the National Stock Exchange (NSE) in Monday’s intra-day trade.  The rally in bank stocks came on the back of Japanese financial conglomerate Sumitomo Mitsui Banking Corporation (SMBC) acquiring a 20 per cent stake in YES Bank from State Bank of India (SBI) and seven private banks for ₹13,482 crore, the largest cross-border banking-sector deal in India, to become its largest shareholder. READ ABOUT IT HERE

 

Nifty Bank, Nifty Private Bank, Nifty PSU Bank indices were up 3 per cent, as compared to 2.4 per cent rise in the Nifty 50.

 

 

Among individual stocks, Axis Bank, IDFC First Bank, Yes Bank, Punjab National Bank, ICICI Bank, HDFC Bank, SBI, Federal Bank, Indian Overseas Bank (IOB), Central Bank of India, Punjab & Sind Bank, Uco Bank, Bank of Maharashtra, Canara Bank and Indian Bank were up in the range of 3 per cent to 5 per cent in intraday deals on Monday.

 

SBI, private banks sell 20 per cent Yes Bank stake to SMBC for ₹13,482 crore

 

Eight major Indian banks—SBI, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank—have announced a combined sale of their 20 per cent stake in Yes Bank to Japan’s Sumitomo Mitsui Banking Corporation (SMBC) for ₹13,482 crore at ₹ 21.5 per share. 

 

This deal will reduce the collective stake of these banks from 33.71 per cent to 13.71 per cent, with SBI divesting 13.19 per cent and the other seven banks collectively selling the balance 6.81 per cent.  

 

All these banks originally acquired Yes Bank shares at ₹ 10 per share during a 2020 bailout package led by SBI to rescue Yes Bank from financial distress caused by distressed loans and capital shortfalls.

 

Any stake purchase by a foreign entity in an Indian bank needs RBI’s approval. Till now, the RBI has only allowed Fairfax, a foreign entity, to buy a controlling stake in CSB Bank. 

  

Motilal Oswal Financial’s view on the Indian financial sector

 

The stake sale in Yes Bank, analysts said, is expected to unlock capital and generate substantial post-tax gains for participating banks. SBI, according to analysts, stands to benefit the most, with an anticipated post-tax gain of ₹ 4,160 crore—equivalent to 94 basis points (bp) of its fiscal 2024-25 (FY25) net worth and an 11bp improvement in its capital-to-risk weighted assets (RWA) ratio.

 

"Initially perceived by the banking sector as an enforced investment, the sale of a 20 per cent stake in Yes Bank to SMBC has yielded a 16.5 per cent compounded annual growth rate (CAGR) for the eight banks. The deal, enhancing CET1 ratios by 2-11bp for underlying banks, has turned a perceived risk into a strategic win and will strengthen the overall financial resilience of the banking system," MOFSL note said.

 

About Sumitomo Mitsui Banking Corporation (SMBC) 

 

SMBC is a wholly owned subsidiary of SMFG, which is the second-largest banking group in Japan, with total assets of $2 trillion as of December 2024. SMBC is among the leading foreign banks in India. SMFG's another wholly owned subsidiary, SMFG India Credit, is among the largest diversified non-banking financial companies (NBFCs) in the country.    (Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd)