Yes Bank Jumps 5% After Japanese Giant SMBC Gets RBI Green Light.

Yes Bank shares witnessed a notable rally on Monday, August 25, 2025, jumping as much as 5% to ₹20.20 during early trading after the Reserve Bank of India (RBI) granted approval to Japan's Sumitomo Mitsui Banking Corporation (SMBC) to acquire up to 24.99% stake in the private lender.

RBI Approval Details

The central bank's approval, dated August 22, 2025, allows SMBC to increase its shareholding in Yes Bank through a secondary market transaction. However, the RBI has clarified that SMBC will not be designated as a promoter of Yes Bank despite the significant minority stake.

The approval remains valid for one year and is subject to compliance with the Banking Regulation Act, RBI guidelines on share acquisitions, FEMA provisions, and other applicable laws. The transaction still requires clearance from the Competition Commission of India (CCI).

Transaction Structure

The stake acquisition involves SMBC purchasing a 20% shareholding through secondary transactions from existing shareholders. This includes:

• 13.19% stake from State Bank of India

• 6.81% combined stake from seven other banks: Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, and Kotak Mahindra Bank

As of June 2025, domestic lenders collectively held 33.7% stake in Yes Bank, with SBI remaining the largest single shareholder at 23.96%.

Recent Financial Performance

Yes Bank's financial turnaround story continues to gain momentum. The bank reported strong Q1 FY26 results with net profit surging 59.4% year-on-year to ₹801 crore, marking its seventh consecutive quarter of profit growth.

Key financial highlights include:

• Net Interest Income (NII) rose 5.7% to ₹2,371 crore

• Net Interest Margin (NIM) improved to 2.5%

• Operating profit jumped 53.4% to ₹1,358 crore

• Asset quality remained stable with GNPA at 1.6% and Net NPA at 0.3%

Stock Performance Analysis

Yes Bank shares have shown mixed performance across different timeframes:

• 6 months: +10.9% gain

• 1 year: -19% decline

• 5 years: +33.15% return

The stock hit a 52-week high of ₹24.84 and trades with a market capitalization of approximately ₹61,600 crore.

Strategic Investment Significance

SMBC's investment, valued at approximately ₹13,483 crore, represents the largest cross-border investment in India's banking sector. For SMBC, this acquisition fills the "missing piece" in their Multi-Franchise Strategy, enabling coverage of all segments in India's commercial banking market.

The Japanese banking giant expects the investment to generate ROE of over 10% by the fifth year, with India's fee pool for commercial banks projected to grow 2.5 times over ten years.

Should You Own Yes Bank Shares?

Investment Considerations:

Positives:

• Strong quarterly profit growth momentum

• Strategic foreign investment validates turnaround story

• Improved asset quality and stable NPAs

• Growing market share in India's expanding banking sector

Concerns:

• Analyst ratings remain cautious with multiple SELL recommendations

• Cost-to-income ratio at 67.1% still needs improvement

• Historical volatility and past crisis create lingering concerns

• Revenue growth remains modest at 4.8% year-on-year

Analyst Outlook:
Current analyst consensus shows a SELL rating with target prices ranging from ₹12 to ₹20, suggesting limited upside potential from current levels around ₹19.75.

Investment Verdict

Yes Bank presents a mixed investment proposition. While the SMBC partnership and consistent quarterly profits signal positive momentum in the bank's turnaround journey, fundamental challenges around cost structure and revenue growth persist.

The stock may appeal to risk-tolerant investors seeking exposure to India's banking sector recovery story, but conservative investors might prefer waiting for sustained improvement in operational metrics before taking positions.

Disclaimer: This analysis is for educational purposes only and should not be construed as investment advice. Investors should conduct thorough research and consult certified financial advisors before making investment decisions.