Overseas Banks' Interest in Indian Mid-Sized Banks Drives Valuations

Strategic Insights -

Indian mid-sized banks, such as RBL Bank and Yes Bank, have attracted significant attention from overseas banks, with the Dubai-based Emirates NBD offering to acquire a 60% stake in RBL Bank for Rs 280 per share. Japan-based SMBC has also acquired a 24.2% stake in Yes Bank at 1.3 to 1.4 times FY25 book value. The valuations attributed to these Indian mid-sized banks reflect their position in the broader Indian banking system, with Emirates NBD's offer implying a 1.1 times FY25 book value for RBL Bank. This trend highlights the growing interest of overseas banks in Indian mid-sized banks, with implications for their growth strategy, profitability, and valuations.

Key Takeaways:

  • Emirates NBD's takeover offer for RBL Bank values the bank at 1.1 times FY25 book value, with an investment of up to $3 billion to gain a 60% stake.
  • Japan-based SMBC has acquired a 24.2% stake in Yes Bank at 1.3 to 1.4 times FY25 book value.
  • RBL Bank's standalone net profit fell by 19.8% y-o-y to Rs 178.5 crore in the September 2025 quarter due to higher provisioning.
  • IDFC First Bank's standalone net profit rose 76% y-o-y to Rs 352.3 crore in the September 2025 quarter due to lower provisioning.
  • Yes Bank's standalone net profit rose 18.3% y-o-y to Rs 654.47 crore in the September 2025 quarter, driven by its growth-oriented approach.
  • RBL Bank's cost-to-income ratio rose to 70.7% in the second quarter of FY26 from 64.2% a year ago, while Federal Bank's cost-to-income ratio stood at 60% in the September 2025 quarter.
  • The RBI has taken several measures to boost lending in the broader banking system, and the recent GST cut on most products is expected to boost demand for credit.
  • Mid-cap bank stocks, including RBL Bank, Yes Bank, Federal Bank, and IDFC First Bank, trade at high valuations, with RBL Bank at 25 times estimated standalone FY26 earnings.

Statistics:

  • Rs 280 per share: the price of RBL Bank's open offer.
  • Rs 280 per share: the price of Emirates NBD's preferential allotment.
  • 1.1 times FY25 book value: RBL Bank's valuation implied by Emirates NBD's takeover offer.
  • 1.3 to 1.4 times FY25 book value: the valuation at which SMBC acquired a 24.2% stake in Yes Bank.
  • 24.2%: the stake acquired by SMBC in Yes Bank.
  • Rs 317: RBL Bank's intra-day Thursday trade price.
  • Rs 229.55: Federal Bank's intra-day Thursday trade price.
  • Rs 79: IDFC First Bank's intra-day Thursday trade price.
  • 25 times estimated standalone FY26 earnings: RBL Bank's P/E ratio.
  • 20 times: Yes Bank's P/E ratio.
  • 15 times: Federal Bank's P/E ratio.
  • 30 times: IDFC First Bank's P/E ratio.
  • Rs 15,000 crore: RBL Bank's net worth before the preferential allotment.
  • Rs 42,000 crore: RBL Bank's anticipated net worth after the preferential allotment.
  • 564: the number of RBL Bank's branches at the end of the September 2025 quarter.
  • 1 lakh crore: RBL Bank's advances in the September 2025 quarter, growing by nearly 15% y-o-y.
  • Rs 2.44 lakh crore: Federal Bank's advances in the September 2025 quarter, growing by nearly 6.1% y-o-y.
  • Rs 2.57 lakh crore: IDFC First Bank's advances in the September 2025 quarter, growing by nearly 19.5% y-o-y.
  • Rs 2.5 lakh crore: Yes Bank's advances in the September 2025 quarter, growing by 6.4% y-o-y.
  • 4.51%: RBL Bank's NIM in the September 2025 quarter, a 53 basis points decline from a year ago.
  • 3.06%: Federal Bank's NIM in the September 2025 quarter, a 6 basis points decline from a year ago.
  • 5.59%: IDFC First Bank's NIM in the September 2025 quarter, a 59 basis points decline from a year ago.
  • 2.5%: Yes Bank's NIM in the September 2025 quarter, a 10 basis points increase from a year ago.

Sources:

  • IE Online Media Services Pvt. Ltd.
  • Contify.com