What Next For YES BANK
At the height of the 2008 financial crisis, New York-based JP Morgan Chase agreed to bail out a troubled investment bank, Bear Stearns, after much prodding by the US government. The deal to buy the marquee bank at a measly price of $10 per share as against the market price of $30 per share (pre-crisis high of $133 per share) after the crisis looked attractive. JP Morgan’s CEO Jamie Dimon initially put up a brave front by boasting about the strengths of the bank’s $2.7 trillion-balance sheet and the marginal impact the acquisition would have on its capital. But as years passed, Dimon realised the big mistake the bank had made in rescuing Bear Stearns. Seven years after the global crisis hit the financial system, Dimon publicly expressed his regret. “No, we would not do something like Bear Stearns again,” he wrote in a letter to shareholders.
This particular story is not to draw any parallel in India. The purpose is to make the point that things do go wrong as ‘bailouts’ are always risky, tricky and, at times, can threaten the very existence of the acquiring institution. Yes Bank’s bailout by India’s largest bank, State Bank
