YES Bank questions UBS snalysts’ intentions; asks Sebi to probe ‘vested’ interests

MUMBAI: YES Bank, India's fifth-biggest private sector lender by assets, has asked market regulator Sebi to probe the "intentions" of analysts of brokerage UBS, who, in a recent report, had painted a bleak picture of the bank's finances if its borrowers were to default.

The bank alleged that UBS' analysts did not make "full and fair disclosure" of their "interests" before publishing the report.

It also said that the UBS report is based on information from the Registrar of Companies (RoC) and that the research firm did not seek comments from the bank regarding the data.

"This report has exaggerated the exposures attributed to YES Bank given that the RoC filings reflect historically sanctioned amounts, which are dated and therefore do not reflect the actual outstanding exposures. The report compares sanctioned amounts to total loans outstanding as at March 31, 2015, thus presenting a distorted picture," a spokesperson of YES Bank told ET.

On July 7, broking firm UBS published a report - India Banking & Financial Sector - deep dive into lending practice - wherein it recommended a 'sell' for YES Bank from its earlier stance of 'buy'. It also sharply lowered the earnings estimate of the bank by 15% in FY2016, and 16% in FY2017.

UBS in its report has cut the target price of YES Bank to Rs 740 from Rs 1,000 earlier. The shares of the bank closed at Rs 815 on Monday. It had plunged 8% to Rs 792 soon after the report was published on Wednesday.

The UBS report said loan approvals to its universe of stressed companies had risen 85% in the three years to March 2015 for the banking industry as a whole whereas for YES Bank the rise was 309%. Consequently, the analysis claimed that YES Bank "is more vulnerable to large corporate defaults."

In its letter, YES Bank said the report violates the code of conduct prescribed by Sebi for "research analysts since the UBS analysts have failed to make full and fair disclosure with regard to their personal interests, if any, as prescribed in the regulations".

In an email response to ET, a UBS spokesperson from Hong Kong said: "While we have no comment to offer on any specific matter, UBS is confident that it has a robust process for producing independent and quality research. We are committed to complying with all laws and regulations in the jurisdictions UBS operates in."

YES Bank has urged Sebi to undertake detailed investigations, adding that "it needs to be probed whether the research analysts involved in the preparation of the 'questionable report' and/or any other employees or relatives/associates of UBS were actively aiding or abetting (directly or indirectly) short sell before publishing the questionable report".

It has told the regulator that the report is "highly biased". "It is important to appreciate that the regulations mandate insertion of a graph depicting the historical closing price of the securities discussed in the questionable report for the assigned period, which is singularly missing," it said in the letter.

"This poses various doubts in the mind of the management of YES Bank as to whether the 'questionable report' is published keeping in mind the best interests of the investors/shareholders of YES Bank or is it a by-product of malice/ malafide intentions," it said.