Yes Bank suffers another setback as Axis Bank reduces its stake

Axis Bank is one of the largest private sector banks in India. It offers a wide variety of financial services like Express Fixed Deposit,Personal loan,car loans etc. Their capital marketing services provide customers with debt ,equity and private equity solutions.

 

Axis bank reported a net profit of 1,683 crores in the second quarter of 2021.In September 2020 the bank’s net interest income soared by 20 percent to reach 7,326 crores.

 

Net interest margin was 3.58 percent(in the year 2020)slightly higher than 3.51(net interest margin of 2019). In the March 2021 quarter Axis bank has declared to reduce its stake in Yes Bank.

 

It will reduce its stake from 2.39 percent to 1.96 percent.Even in the past a lot of private banks have cut their promoter stake. In August 2020  Kotak Mahindra’s promoter Uday Kotak  was directed by RBI to reduce its share in the bank to 26 percent.

 

In the June quarter 2020 Kotak’s share in the bank was 25.82 percent. Later RBI  allowed KMB  to retain 26 percent promoter stake. There are ample reasons for reducing the stake in a private bank. The major ones are  RBI’s discretion policy and primary losses for the private bank(where the shareholder has stake in).

 

(Recommended blog: RBI: History,Objectives and Functions)

 

According to mint,Yes Bank reported a heavy loss of nearly 38 billion which is much higher than the estimated loss that was predicted by experts.

 

Although Axis Bank has reduced its stake in Yes bank the other banks namely SBI,ICICI,IDFC and Bandhan Bank have retained their stake in Yes Bank.

 

Yes Bank witnessed a slow growth of 1.3 percent during the December 2020 quarter.Lender’s deposit also increased at a steady rate to reach 7.7%(1.46 lakh). Yes Bank Limited’s share value dropped down to 13.83INR(as on 4.05.2021).

 

Yes Bank’s share price is failing at the BSE after the revelation of its quarterly reports. The closing share  price of Yes Bank  was 13.91(on 3.05.2021) . Yes Bank has repeatedly been  incurring losses since the last 4 quarters .

 

The major reasons behind these series of losses are inability to hold its market position,huge liabilities and heavy outflow of liquidity. Yes Bank was unable to reinstate faith in customers and hence its market value continued to deteriorate.

(Must check: What is Service Marketing?)