Yes Bank’s $5 Billion Stake Said to Attract Lenders From the Middle East, Japan

Customers stand in line outside a Yes Bank Ltd. branch in Mumbai. Photographer: Dhiraj Singh/Bloomberg (Dhiraj Singh/Bloomberg)

(Bloomberg) -- First Abu Dhabi Bank PJSC is among potential suitors for a roughly $5 billion stake in India’s Yes Bank Ltd., according to people with knowledge of the matter.

The Middle Eastern lender is weighing a bid for as much as a 51% stake in Yes Bank, the people said, asking not to be identified as the deliberations are private. The stake sale has also drawn preliminary interest from Japan, including Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., although it remains unclear how strong their appetite for a deal is and whether they will proceed, the people said.

Yes Bank shares jumped as much as 8.5% on Thursday, the biggest intraday gain in almost a week. The stock has climbed about 25% this year, giving the Mumbai-based lender a market value of $10 billion.

Considerations are ongoing and the potential size of the stake sale could change, the people said. The banks may also decide against pursuing a deal or some could consider other investment options, the people said. 

First Abu Dhabi Bank “categorically states that it is not evaluating any possible offer for a stake in Yes Bank,” the lender said on a statement on Thursday. MUFG and SMFG declined to comment. A representative for Yes Bank didn’t immediately respond to a request seeking comment.

Yes Bank said this week it hasn’t received any in-principle approval from the Reserve Bank of India for a 51% stake sale. 

State Bank of India has pared its holding in Yes Bank after rescuing the lender four years ago when it was inundated with bad loans. It remains its biggest shareholder with a 24% stake. SBI’s chairman Dinesh Khara’s tenure is due to end in August, potentially delaying a deal involving Yes Bank. A government-appointed panel has recommended he be replaced by Challa Sreenivasulu Setty.

Share sales, mergers and acquisitions and other dealmaking is on the rise in India as global investors seek to tap into the country’s rapid economic growth. 

Middle Eastern banks like FAB are casting overseas for expansion opportunities, with lenders in Turkey and Egypt among its targets, as well Standard Chartered Plc. 

Japan’s biggest lenders have been scouring for deals to boost their lending revenues and build out their investment banking operations. MUFG has been eyeing a minority stake in HDFC Bank Ltd.’s consumer lending unit, Bloomberg News has reported.

--With assistance from Ashutosh Joshi, Manuel Baigorri, Joyce Koh, Hideki Suzuki, Taro Fuse, Taiga Uranaka and Nicolas Parasie.

(Adds comment from First Abu Dhabi Bank in fifth paragraph.)

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