Yes Bank shares plunge 20% to hit fresh 52-week low after Q1 net tanks 91%, brokerages slash target price

New Delhi: Yes Bank shares fell as much as 20% on Thursday hitting a fresh 52-week low of Rs 79.15 on the National Stock Exchange, after the private sector lender reported 91% decline in Q1 net profit due to a sharp rise in slippages, increase in provisions due to mark-to-mark (MTM) losses on investments made in financial services companies and drop in fee income.

The Mumbai-based lender, which reported its earnings for the April-June quarter on Wednesday post-market hours, said its profit plunged 91% to Rs 114 crore from Rs 1,260 crore a year ago. In Q1, Yes Bank more than doubled its provisions to Rs 1,784 crore (up from Rs 625 crore in the corresponding quarter of last fiscal) due to Rs 1,109 crore MTM provision after credit rating of its investments were downgraded.

Its slippages or fresh loans that turned bad in the reporting quarter, also nearly doubled to Rs 6,232 crore from Rs 3,481 crore, indicating that there is no relief yet from asset quality stress.

According to a Bloomberg poll of analysts, Yes Bank was expected to report Rs 135 crore net profit in the June quarter.

CASA deposits, which is a low-cost deposit for banks, dropped to 30% from 33% in the March quarter, reflecting that there is pressure on its margin and profitability. “The more than Rs 6,000 crore slippages during the quarter is on the higher side given that the full-year guidance was for Rs 12,000 crore. The high stress in the bank’s balance sheet could now have an impact on margins. We have to also watch out for the impact on cost of funds because already the ratio of current and savings account deposits (CASA) has come down to 30% from 33% in March,” said Mona Khetan, analyst at Reliance Securities.

Yes Bank’s other incomes, which includes fees and commissions, declined 25% annually to Rs 1,273 crore while its expenses increased 23% year-on-year to Rs 7,130 crore as against as Rs 5,817 crore in the year-ago quarter.

The tier I equity capital of the private sector lender fell to 8% from 8.4% in the quarter ended March, indicating pressing need to raise capital. In a conference call with analysts after the results CEO Ravneet Gill said the management is cognisant of the need to raise capital. “The urgency in terms of capital is not lost on us but we have multiple levers in terms of capital….interest from investors has gone up multiple times and we continue to see capital raising as a quarter two event,” Gill said.

Yes Bank asset quality

Asset quality of Yes bank worsened further in Q1. Gross non-performing assets(GNPA) stood at Rs 12,092 crore as against Rs 7,883 crore in the March quarter and Rs 2,824 crore in the year-ago quarter. As a percentage of total assets, it stood at 5.01% vs 3.22% sequentially and 1.31% last year. Net NPA which is GNPA minus provisions rose to Rs 6,883 crore, up from Rs 4,485 crore in the March quarter and Rs 1,262 crore in Q1 of FY19. As a percentage of assets, net NPAs stood at 2.91% as against 1.86% in the March quarter.

“We are closely engaged with domestic and foreign investors for equity infusion into the bank,” Gill told ET Now in an exclusive interview adding that he expects resolution of some of the stressed accounts in the current quarter. Gill believes that earnings trajectory should strengthen from here on.

Brokerages view on Yes bank

Following Yes Bank’s Q1 result, Credit Suisse maintained “neutral” rating on the stock while cutting target price on shares to Rs 94. The brokerage has slashed its EPS expectation by 72% and expects weaker growth and higher credit costs. “Drop in CASA deposits, highlights pressing recap needs,” the brokerage said.

Meanwhile, another global brokerage JP Morgan has also maintained “neutral” rating on Yes Bank with target price at Rs 110.

As of 11:13 am, Yes Bank shares traded 11.70% lower at Rs 86.90 a piece as against its previous closing price of Rs 98.40 on the NSE. Including today’s fall, Yes Bank shares have dropped around 57% in the last six months.
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