On a wing and a prayer
RBI took control of the country’s fifth-largest private sector lender YES Bank on Thursday and imposed limits on withdrawals, spreading confusion and fear among account holders.
Shares of YES Bank, which traded at Rs 404 at its peak in August 2019, fell to a record low of 5.65 rupees on Friday, with the stock plunging nearly 85 per cent. The fall wiped out Rs 79.43 billion ($1.08 billion) from YES Bank’s market value.
Here’s a look at the events leading up to the Reserve Bank of India’s move.
Change in leadership (Sept 2018- Feb 2019)
Sept. 19, 2018 – RBI refuses to give Chief Executive Officer Rana Kapoor an extension to his term – Kapoor to step down by end of January 2019
Nov. 27 – Moody’s cuts bank’s foreign currency issuer rating; changes outlook to ‘negative’ from ‘stable’ citing concerns over corporate governance
Jan. 24, 2019 – YES Bank hires the head of Deutsche Bank India Ravneet Gill as its new CEO
Feb. 13 – YES Bank says RBI observed no divergences from central bank norms in the bank’s asset classification and provisioning
Downfall begins (April 2019- July 2019)
April 8 – Pressed for capital, YES Bank says it will consider raising funds by issuing shares and debt securities
April 26 – Rising levels of bad loans trigger YES Bank’s first-ever quarterly loss; Macquarie Research double-downgrades stock to ‘underperform’, stock tanks 30 per cent on next trading day
May 14 – RBI appoints ex-central bank Deputy Governor R. Gandhi as additional director to YES Bank’s board – a rare move signalling an increased level of scrutiny on the lender
July 17 – YES Bank reports 91 per cent drop in first-quarter profit, as provisions surge and asset quality deteriorates sharply; gross bad loan ratio stood at 5.01 per cent
Glimmer of hope (Sept 2019- Oct 2019)
Sept. 10 – YES Bank CEO Gill says lender is close to securing a deal to sell a minority stake to a global technology company to help boost its capital
Oct. 3 – CEO Gill says bank is in talks with private equity firms, strategic investors and family offices to raise additional capital
Oct. 31 – YES Bank gets binding investment offer of $1.2 billion from global investor, sends stock 39 per cent higher
Phantom pain & RBI’s entry (Nov 2019- Now)
YES Bank reports bigger-than-expected loss for the second quarter, as bad loan ratio deteriorates to 7.39 per cent and provisions swell to 13.36 billion rupees
Nov. 29 – YES Bank says it aims to raise up to $2 billion in a massive issue of new shares to institutional investors and family offices; says it is in talks to sell shares worth $1.2 billion to Canadian investor Erwin Singh Braich and Hong Kong-based SPGP Holdings, which he backs
Jan. 10, 2020 – YES Bank rejects Braich’s investment, says will launch a $1.4 billion share sale, after a board member’s resignation casts more doubt on the lender’s future
Feb. 12 – The lender says it will delay disclosing its October-December earnings by at least a month, and that it was in talks with potential investors for a cash infusion
Feb. 12 – Bank says it received non-binding expressions of interest from JC Flowers, Tilden Park Capital Management, OHA (UK) and Silver Point Capital.
March 5 – India places YES Bank under moratorium, with RBI taking over from its board for 30 days and imposing limits on withdrawals to protect depositors