November 14, 2018 / 4:58 PM / in 6 months

Yes Bank sinks; chairman's departure heightens concerns

(Reuters) - Yes Bank Ltd shares fell sharply on Thursday, a day after non-executive independent chairman Ashok Chawla resigned, further fuelling the uncertainty over the management of the country’s fifth largest private-sector lender.

Employees enter a Yes Bank branch at its headquarters in Mumbai, January 17, 2018. REUTERS/Danish Siddiqui/Files

Yes Bank shares fell as much as 9.1 percent to 202.25 rupees, in their biggest single-day fall since Oct. 26.

Chawla’s departure exacerbates the turmoil the management is in, after the Reserve Bank of India (RBI) denied an extension to its Chief Executive Officer Rana Kapoor for a second time last month.

“There have been challenges in the bank. Any news that someone is resigning raises speculation about what is happening in the bank. It raises doubt the corporate governance of the bank,” an analyst with a Mumbai-based brokerage, who did not wish to be named, said.

“The faith in the institution again has to be built up.

Till the time you don’t instill confidence in terms of bringing a credible management on board and the RBI gives nod that in terms of the asset quality reviewed, the divergence was limited, the stock will be a little volatile,” the analyst added.

The bank will name a new chairman in due course, subject to an approval from the RBI, it said late on Wednesday.

“The problem is who is going to drive the bank, though it might not be a long-term problem,” said AK Prabhakar, head of research, IDBI Capital in Mumbai.

“These are the banks where the ownership is still there and they will try to find a new person and very soon they will come out of this. There is some uncertainty due to which the volatility has increased, but the management is very clear how they are going to proceed,” Prabhakar said.

Yes Bank is looking for a new chief executive by the Feb. 1 deadline imposed by India’s central bank.

More than 48.2 million shares changed hands, as of 0741 GMT, compared with their 30-day moving average of 48.5 million shares.

Reporting by Krishna V Kurup and Mekhla Raina in Bengaluru; Editing by Sunil Nair

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