Shares of YES Bank surged by more than 30 per cent on the BSE a day after the private sector lender received a nil divergence report from the Reserve Bank of India.

The YES Bank scrip gained 30.73 per cent on the BSE and closed at ₹221 apiece on Thursday. Intraday, it jumped by an even sharper 32.32 per cent to ₹223.70. Following the sharp rise in its shares, the bank’s market valuation shot up by ₹12,025.11 crore to ₹51,114.11 crore on the BSE

“YES Bank has received the Risk Assessment Report for 2017-18. The report observes nil divergences in the bank’s asset classification and provisioning from the RBI norms,” the lender had said in a filing on Wednesday.

The news came after the lender had reported divergences for two previous years, 2015-16 and 2016-17. Though there has been no formal word, it is widely perceived that the issue of divergences was one of the reasons why the RBI cut short Rana Kapoor’s term as MD and CEO.

The bank’s shares had fallen by over 40 per cent last year after the RBI had cut short the term of Rana Kapoor as Managing Director and CEO.

However, analysts believe that concerns are now fading with the RBI’s latest report showing no divergences or under-reporting of loans, and it will start off with a clean slate when Ravneet Gill, the new MD and CEO, joins next month.

Analysts’ reaction

Lalitabh Shrivastawa, AVP, Research, Sharekhan by BNP Paribas, said: “As per our view, there were mainly three major challenges, or overhangs, before the YES Bank stock. Of those, two have been removed, that is, the management transition has been smooth, and now the RBI’s inspection report has given it nil divergence.”

He added that the third issue of capital-raising is now less of an issue, and will only be a matter of time. “Overall, this development improves the outlook significantly for YES Bank,” he said.

Motilal Oswal, in a research report, also said the worst appears to be behind the lender as the key overhang has been addressed.

“YES Bank appears to have made a compelling statement to the market, to the investors, and, in particular, to all its sceptics about its compliance practices in reporting bad loans,” it said, adding that this development comes after months of speculation on the magnitude of divergence that the bank was expected to report, particularly after its MD and CEO was forced to step down by the RBI.

“Clarity in this regard will help the bank clear the air on one of the key overhangs and start a fresh journey under the new MD and CEO,” the report noted.

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