Yes Bank’s stake sale to Sumitomo Mitsui Banking Corporation (SMBC) is likely to close by September.

Japan’s second-largest bank has already made applications to both the Reserve Bank of India (RBI) and the Competition Commission of India (CCI), Yes Bank managing director and CEO Prashant Kumar said in a post-earnings call. “We are hopeful that the deal will be able to conclude, say, in the month of September.”

After the transaction, SMBC will hold 20% stake in Yes Bank and become the largest shareholder in the Indian bank.  

Kumar, however, declined to comment on specifics of the deal.

SMBC will buy 13.19% stake from the State Bank of India (SBI) for Rs 8,889 crore and a 6.81% aggregate stake from other banks, including ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, IDFC First Bank, Federal Bank and Bandhan Bank for Rs 4,594 crore. 

While SBI holds a 24% stake in Yes Bank, the other seven banks have a shareholding of 9.4%. 

SMBC is a wholly-owned subsidiary of Sumitomo Mitsui Financial Group. 

Q1 results

Yes Bank expanded its quarter net profit for the seventh time in a row, achieved this time more by a tight control on expenses than top-line growth. 

With a net profit of Rs 801 crore in the June quarter, up 59% from the year-ago period, this is Yes Bank’s most profitable quarter after being bailed out by a clutch of banks led by SBI.

“Much of the bottom-line accretion has come from squeezing the opex part,” Kumar said.

The bank’s net interest income, or the difference between interest paid and earned, grew 5.7% to Rs 2,371 crore in the June quarter on back of a decrease in the cost of funds. 

Non-interest income grew 10.9% to Rs 1,739 crore.

Net interest margin (NIM) was recorded at 2.5% in the June quarter, showing a year-on-year increase, aided by a reduction in deposits due to priority sector lending shortfall and a decrease in saving account rates, though this was somewhat countered by the impact of repricing, the bank said in a filing with the exchange.

The cost-to-income ratio decreased to 67.1%, from 74.3% a year ago.

 The lender’s gross non-performing assets (NPA) remained flat at 1.6% and net NPA at 0.3%. 

The provision coverage ratio (PCR) rose to 80.2%.

During the June quarter, recoveries and upgrades amounted to Rs 1,170 crore, including Rs 338 crore from security receipts. 

However, slippages increased to Rs 1,458 crore, from Rs 1,223 crore in the previous quarter. This was mainly from small enterprise, micro-industrial accounts and some secured mortgage cases. 

The loan book grew by just 5% year-on-year to Rs 2.41 lakh crore. Retail loan growth was almost flat, rising by just 0.3%. The bank took a conscious decision to reduce exposure to low-margin segments like car and prime home loans.

Kumar said the bank continued to exercise caution on unsecured retail loans but delinquencies in segments like personal loans and credit cards started improving. 

The commercial banking segment saw a 19% rise and the micro banking sector 11.2%.

Deposits grew 4% from the year-ago quarter to Rs 2.75 lakh crore.

The cost of deposits fell to 5.9%, from 6.1% in the preceding quarter, due to a reduction in savings account rates. The overall cost of funds improved by 15 basis points. 

The bank’s credit-to deposit ratio was at 87.5% in the June quarter, from 86.5% in March and 86.6% in the year-ago quarter.