Shares of YES Bank may fall up 20 per cent from its current levels, says brokerage firm ICICI Securities, which continued to maintain a 'sell' rating on the stock It said that net interest margins (NIMs) and return on assets (RoA) are stable on a quarter-on-quarter (QoQ) basis, but valuations appear fully pricing in the financial turnaround.
Yes Bank has reported stable NIM on a sequential basis, while opex and credit costs declined QoQ, RoA was flattish due to lower other income, said ICICI Securities. Post the warrant conversion, CET 1 stands at 13.3 per cent and operating parameters have been on an improving trajectory though RoA remains burdened by bulky RIDF investment, it said.
YES bank is making concerted efforts in organic PSL origination, which should ease incremental RIDF burden, aiding yields and RoAs, said ICICI Securities. "This, coupled with easing credit costs, could improve RoA to 0.7 per cent and 1 per cent by FY25 and 26E," it said.
Yes Bank reported a 47 per cent year-on-year (YoY0) rise in its standalone net profit of Rs 502.43 crore for the quarter ended June 30, 2024. It had posted a net profit of Rs 342.52 crore in the year ago period. On a sequential basis, net profit rose 11.2 per cent from Rs 451.89 crore.
Net interest income (NIIs) grew 12.2 per cent YoY to Rs 2,244 crore in Q1FY25 from Rs 2,000 crore in Q1FY24. On a sequential basis, NIIs rose 4.2 per cent QoQ from Rs 2,153 crore. YES Bank's NIMs came in at 2.4 per cent for the June 2024 quarter, mostly flat. The gross NPA ratio of the bank stood at 1.7 per cent, while net NPAs were at 0.5 per cent as of June 30.
Shares of YES Bank were trading range-bound during the trading session on Wednesday. The stock marginally rose Rs 25.03 during the session, with its total market capitalization near Rs 78,500 crore. The scrip had settled at Rs 24.96 in the previous trading session on Tuesday.
However, current valuation at 1.5 times FY26E ABV seems to adequately capture the turnaround. Maintain 'sell' rating with an unchanged target price of Rs 20," ICICI Securities added, suggesting a 20 per cent fall in the stock and citing faster than expected ramp-up in organic PSL yielding steep RoA improvement as the key risk for the lender.
Among other brokerage firms Kotak Institutional Equities said the write-back in investment depreciation - mostly related to resolutions in loans sold earlier - aided a lower provision. It maintained its 'sell' rating on it, saying the risk-reward remains unfavorable with the underlying return on equity (RoE) improvement likely to be slow. Fair value for YES Bank by Kotak is Rs 19.
Another brokerage firm Nomura India said YES Bank's returns profile is on a gradual improvement trajectory and it finds it encouraging. The foreign brokerage has suggested a 'neutral' rating on the stock with a target price Rs 17 on the stock, suggesting a 32 per cent fall in the stock.
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