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Brokerages lower Yes Bank outlook

Various brokerages have downgraded the stock and cut their target price amid worries over asset quality

By Our Special Correspondent in Mumbai

  • Published 30.04.19, 1:05 AM
  • Updated 30.04.19, 1:05 AM
Ravneet Gill
Ravneet Gill (Yes Bank)

The Yes Bank stock is likely to come under pressure when trading resumes Tuesday, following the announcement of its results post trading hours on Friday with the bank reporting a loss of Rs 1,500 crore.

Various brokerages have downgraded the stock and cut their target price amid worries over asset quality.

The losses in the fourth quarter of the current fiscal was on account of higher provisions made by the bank under new CEO Ravneet Gill.

Provisions spiked to Rs 3,661.7 crore, with a contingency amount of Rs 2,100 crore following a review of its credit portfolio. Yes Bank had earned a net profit of Rs 1179.4 crore in the fourth quarter of 2017-18.

NPAs in absolute terms rose to Rs 7,882.56 crore against Rs 5,158.62 crore in the previous quarter.

Gross NPA as per centage of total assets rose to 3.22 per cent from 2.10 per cent in the previous quarter.

The Yes Bank share has corrected almost 11 per cent over the past fortnight, but analysts said the stock could come under more pressure on Tuesday with many of them downgrading the stock.

Some of the brokerages to cut their rating include BoB Capital, Emkay, Axis Capital and Edelweiss.

CEO concern

Macquarie “double” downgraded the share to underperform from outperform and cut the target price by 40 per cent to Rs 165. The brokerage said the CEO himself had flagged a large stressed pool, aggressive accounting practices and weakness in retail the franchise that dampen their fundamental view on the robustness of the business model.

“Over the past 8 years, we have been constructive on Yes Bank’s ability to not just survive, but thrive in a risky business segment like structured finance,” Macquarie said in a note.

“We must eat humble pie and admit we underestimated risks in structured finance. We got the call wrong.”

During the fourth quarter, net interest income — interest earned minus interest paid — grew 16.3 per cent over the same period last year to Rs 2,506 crore. Non-interest income dropped almost 63 per cent to Rs 532 crore.

For the period ended March 31, 2019, advances showed a growth of around 19 per cent to Rs 241,500 crore from a year ago, while deposits rose 13.4 per cent to Rs 2,27,610 crore.