YES Bank- Should Investors Get Excited?
A buzz has been created in the Dalal Street with Yes Bank posting its September quarter earnings.
The private lender successfully projected a slight improvement in asset quality. Against last year’s Rs 600.08 crore loss for the same quarter, the bank this year gained a Rs 129.37 crore profit. Rs 45.44 crore was the profit for the June quarter.
Investors are eyeing the stock eagerly as it traded slightly above its previous high.
Analysts, however, are divided in their opinions.
Ambareesh Baliga, an independent market analyst, is of the opinion that people shouldn’t expect the stock to scale previous high. “After the expansion and dilution of equity capital, it is very unlikely to go anywhere that mark," he said, “It is a very rare case when a bank has survived an RBI-imposed moratorium. In earlier instances, such banks were either unable to survive or merged with larger peers.”
There was, in fact, a question of survival for the bank a year back. However, it has come a long way from there. The credit for this goes to the professional management put in by the government.
Vice-President for Research at Religare Broking, Ajit Mishra, said, “YES Bank has posted decent earnings, considering the challenges it has faced over past several quarters.” He further added that it’s still important to be cautious as the NPA situation could worsen due to the pandemic.
A close watch is being kept on NPA, provisions, margins and growth in deposits and loan books by the analysts. Against the previous quarter’s 17.30% gross NPA, the % stood at 16.30%. Net NPA also improved from 4.96% to 4.71%.
At Rs 12.57, the stock traded 2% down in a depressed market.
MD and CEO Prashant Kumar told ETNow, “The bank has generated decent operating profit despite Covid-19 and past issues,”
“The bank has really accelerated on its recovery path, and normalcy is being restored," he further added.
While the September quarter earnings increased on a quarter-on-quarter basis, it declines at a year-on-year basis. Net interest income plunged 9.70% YoY to Rs 1,973 crore.
According to Baliga, though YES Bank is back on track, it will take some more time for the turnaround. “No fortunes will be made overnight. Investors need to be patient and hold on for a long time for better performance,” he said.
Mishra, on the other hand, said that despite the initial uptick in the stocks, sustainability is dubious. Investors should wait and watch the performance of the lender in the second half of the financial year.
Emkay Global, brokerage firm, has a ‘sell’ rating on the bank’s stocks with a Rs 9 price target. Sub-par return ratios and unfavorable risk-reward with a higher valuation than peers were cited by the firm.
The stock was put under review by Edelweiss. The brokerage said, “Though capital-raising is past, deposit accretion and asset quality are key elements to monitor, not to mention stakeholder confidence. Evolution focus over the next two–three years is very much an open question,”