FAB And Mizuho Compete For SBI's Yes Bank Stake Acquisition

First Abu Dhabi Bank (FAB) from the UAE and Mizuho Bank from Japan are reportedly vying for the State Bank of India's (SBI) 25% stake in Yes Bank.

The move comes shortly after SBI initiated the process of divesting its stake in Yes Bank, signalling a keen interest from foreign entities in India's banking landscape.

Yes Bank's shares decline by 1.45% to Rs 25.07 on the BSE and 1.55% to Rs 25.05 on the NSE. Meanwhile, SBI stocks remain relatively stable, trading flat at 0.20% to Rs 835 on the BSE and slightly down by 0.20% to Rs 828 on the NSE.

According to media sources, both FAB and Mizuho Bank have expressed strong interest in acquiring SBI's stake in Yes Bank. Mizuho Bank has already taken proactive steps by appointing Bank of America to oversee the deal, demonstrating its commitment to pursuing this acquisition. On the other hand, FAB has engaged in discussions with the Reserve Bank of India (RBI) to explore various acquisition structures, indicating its serious intent to enter the Indian market through Yes Bank.

Citibank has been tasked with the responsibility of finding a suitable buyer for SBI's stake in Yes Bank. The investment bank's primary focus is on engaging with large foreign investors to ensure that the deal attracts top-dollar foreign direct investment into India's banking sector. As of now, no domestic investor or foreign private equity fund has been approached, underscoring the preference for international players in this strategic move.

Potential investors have been presented with three options regarding SBI's stake in Yes Bank. They can either acquire the existing 26% stake, increase their stake to 49% through an open offer after acquiring SBI's stake, or seek approval from the RBI for a majority shareholding of 51%. The RBI's master direction on ownership in private sector banks allows foreign investment of up to 74% of the paid-up capital, providing ample room for potential investors to manoeuvre within regulatory boundaries.

Both FAB and Mizuho Bank boast branch operations in India, with a focus on corporate finance and global transaction banking. While their strengths lie in catering to large overseas corporate clients, they are also recognised globally for their retail banking prowess, with FAB particularly known for its credit card products. This diversified expertise positions them well to capitalise on the opportunities presented by Yes Bank's strategic acquisition.

The backdrop of this potential deal dates back to March 2020, when SBI led a consortium of banks in bailing out Yes Bank during a period of financial distress. SBI, along with other key players like HDFC Ltd. and ICICI Bank, played a crucial role in stabilising Yes Bank's operations. Collectively, these banks held a significant stake in Yes Bank, underscoring the collaborative effort to restore stability to the financial institution.

In addition to SBI, other major Indian banks such as Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC Bank collectively hold a 7.7% stake in Yes Bank, further highlighting the interest of domestic players in the bank's future trajectory.

As FAB and Mizuho Bank gear up to compete for SBI's stake in Yes Bank, the outcome of this race could potentially reshape India's banking landscape, paving the way for increased foreign investment and expertise in the sector. With Citibank at the helm of the deal-making process, all eyes are on the eventual winner and the implications of their strategic entry into Yes Bank.