Yes Bank sparks selloff in lenders as ‘investors’ exit

Bloomberg

Yes Bank Ltd slumped to the lowest level in a decade, leading a selloff in Indian lenders. IDFC Securities Ltd says the blood-letting in the stock isn’t done yet.
The brokerage slashed the bank’s target price to 35 rupees, implying a 15 percent drop from Monday’s close of 41.4 rupees. The stock plunged 15 percent to the lowest price since February 2010, dragging all but two of the 10 members of the S&P BSE Bankex Index into the red.
“We see more bad loans, higher haircuts due to slower resolutions and uncertainty around equity raising given the sharp correction in stock price,” MahrukhAdajania, Mumbai-based analyst at IDFC Securities, said.
Yes Bank is one of the lenders worst affected by the nation’s shadow banking crisis, which has soured the sentiment for the entire financial sector. Small- and mid-sized lenders are being hit the hardest amid a steady drip of reports of financial irregularities and surging bad loans.
Earlier this month, the central bank curbed deposit withdrawals from the unlisted Punjab & Maharashtra Co-operative Bank Ltd on alleged irregularities and failure of internal controls. Last week, the Reserve Bank of India imposed lending limits on Lakshmi Vilas Bank Ltd citing a high level of bad loans and insufficient capital to absorb risk.
Yes Bank has seen its shares crash 77 percent this year on concerns about the lender’s thinning capital buffers and its sizable exposure to the cash-strapped shadow lenders. The approval by the RBI to raise capita, failed to put the brakes on the swift descent.
The bank’s exposure to a “real estate conglomerateis totally secured and over the last six months there has been a reduction of about 30 percent in this exposure,” Managing Director Ravneet Gill said.
Still, a merger with a “large state-owned bank is the only way out” for Yes Bank, given the lender’s capital shortage, IDFC Securities’ Adajania said in the note.