For much of 2020, YES Bank was in the news for all the wrong reasons. But over the past week, the banking stock has been in the news as its share price rose over 13%. What excited investors was the bank confirming the sale of its non-performing assets (NPAs) worth approximately Rs 48,000 crore to JC Flowers Asset Reconstruction on Saturday. 

This takes the lender’s gross NPAs below 2% from 12.9% in Q2FY23 and net NPAs below 1% from 3.6% in Q2FY23. This is the largest sale of bad loans ever recorded in India and helps the lender strengthen its balance sheet and potentially make it an effective bank again. In light of this news, we take a look at how YES Bank performed over the three years since the arrest of its co-founder and Chief Executive Officer (CEO). During this period, the stock lost nearly 40% of its value.

The biggest weekly fall over the past three years came during the week ending March 1, 2020, when the Enforcement Directorate arrested  Rana Kapoor, co-founder and CEO of YES Bank, in a Rs 466.5 crore money laundering case. In reaction, the stock plunged a massive 53.3% that week. 

Following this development, the Reserve Bank of India (RBI) stepped in, imposing a 30-day moratorium on the bank and superseding the lender’s board of directors. It appointed Prashant Kumar, Chief Financial Officer (CFO) and deputy managing director of the State Bank of India, as an administrator on March 5, 2020. The stock rose 58.4% during the week ending March 8, 2020, as investors were expecting better days for YES Bank. But it still could not recover all of its losses from the previous week. 

However, in the past year, YES Bank has been on the road to recovery. It outperformed the benchmark index by 39%. More recently, the bank rose 13.2% during the week ending December 4, 2022, as the RBI issued a conditional approval to Carlyle Group and Verventa Holdings to acquire a 10% stake each in the bank through subscription of equity shares and share warrants of the lender on December 1, 2022. 

Investors will be wary about the stock after the bank’s dramatic fall from grace.With a strong outlook for the banking sector, we will have to wait and see if YES Bank can become a real recovery story and use this tailwind to grow its loan book.