HSBC downgrades SBI to 'hold' from 'buy' after YES Bank revival plan

Mumbai: HSBC has downgraded State Bank of India to hold from buy and reduced target price to Rs 300 from Rs 405 after the announcement of RBI's draft scheme to reconstruct YES Bank.

The scheme entails SBI taking a 49% equity stake in YES Bank at Rs 10 per share, implying an initial investment of Rs 2,500 crore for newly issued YES Bank shares.

The brokerage believes that further capital infusion will be needed for write offs and further recapitalisation up to Rs 12,600 crore.


HSBC said the key risk factor is depositors’ behaviour once the moratorium is lifted. "...possibility of an outright merger of Yes Bank into SBI cannot be ruled out if liquidity stays tight due to deposit withdrawals," said HSBC.

The proposed AT1 write-off could have broader sector implications, said HSBC. "If other banks join the rescue over the coming days we would expect this to build confidence in the banking system," said HSBC.