Yes Bank shares gain 2% as street encourages lender to clean up bad debts

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Shares of YES Bank rose more than 2% on Thursday after shortlisting JC Flowers Asset Reconstruction Co. to offload around Rs 51,000 crore of its bad debts as the private lender seeks to clean up its books.

As of 09:42 IST, shares of YES Bank were trading up 1.1% at Rs 13.38 on BSE. The stock has plunged 91% over the past three years.

Here’s what the sources told CNBC-TV18

YES Bank has selected US private equity firm JC Flowers as a joint venture partner for its proposed Asset Reconstruction Company (ARC), two people with direct knowledge of the matter said on condition of anonymity.

The bank is said to be in the final stages of formalizing its agreement with JC Flowers.

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This is YES Bank’s second attempt to set up its own CRA after the Reserve Bank of India rejected its previous proposal in March last year. The bank had therefore proposed a new structure, in which it would hold 20% of the capital of the proposed ARC, and its foreign joint venture partner would hold 80% of the capital.

This agreement will result in the largest ever transfer of bad debts from a bank to a CRA in one go, and will also help YES Bank to become a net-zero non-performing asset (NPA) bank.

YES Bank, share price, Indian stock market Quality of assets of YES Bank in the third and fourth quarters of FY22

The allowance for bad debts, money set aside from profits to cover future losses from unpaid loans, fell 95% between January and March 2022.

Earlier in May, Prashant Kumar, managing director and CEO of YES Bank, told CNBC-TV18 in an interaction that the bank had recovered Rs 13,000 crore in defaulted loans over the past two years and could recover another Rs 5,000 crore in the next 12 months.

First post: STI

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