YES Bank shares at Rs 21? This private lender may report multifold jump in Q4 profit sequentially

YES Bank, the beleaguered private lender, is set to announce its quarterly earnings later this week. It is scheduled to report its results for the period ended on March 31, 2023 on Saturday, April 22.

Analysts are expecting YES Bank to report a manifold jump in the profit after tax (PAT) on the sequential comparison (QoQ), while its pre-provisioning operating profit (PPOP) is likely to remain muted on a quarter-on-quarter comparison. However, it may post decent growth on a year-on-year (YoY) basis.

The belief that net interest income (NIIs) is likely to remain muted on both fronts, but the private lender may report some improvement in the net interest margin (NIMs). Asset quality, management commentary and provisioning will continue to remain key factors to watch out for.

YES Bank is India's most widely owned stock, held by 50.57 lakh shareholders at the end of the March 2023 quarter. YES Bank, whose mandatory lock-in of three years expired on March 13, 2023, is down 95 per cent in the five years. At the end of the December 2022 quarter, YES Bank had 48 lakh shareholders.

According to the analysts tracking the stock, the focus is shifting towards rebuilding the business for the bank and most conversations would be on growth and return to normalized levels of business operations.

Kotak Institutional Equities (KIE) expects YES Bank to report 1,923.8 crore NII in the March 2023 quarter, up 6 per cent YoY but 2 per cent on QoQ basis. Its net profit is likely to be around Rs 321.7 crore, a fall of 12 per cent YoY, while jumping 524 per cent in QoQ terms. However, the lender's PPOP is seen at Rs 760 crore, declining on both YoY and QoQ basis.

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It expects NII to grow 6 per cent YoY reflecting the underlying business growth. Business momentum is gaining traction across retail and MSME segments but overall loan growth to be lower than industry average at 11 per cent YoY. Deposit growth at 11 per cent is meeting the business requirements but has significantly decelerated in recent years.

"We expect NIM QoQ at 2.5 per cent, with revenue growth pressure to remain high especially led by weak treasury income. We should have traction on recovery and upgrades this quarter but the impact on earnings is likely to be difficult to forecast given the nature of provisioning policies likely to be adopted and the recovery rates recorded on these transactions," Kotak added.

JM Financial sees its NIIs rising 21.7 per cent YoY and 12.4 per cent QoQ to Rs 2,215.1 crore, but its PPOP may fall 6.7 per cent QoQ to Rs 852.4 crore in the Q4FY23. The brokerage pegs the PAT at Rs 405 crore, rising 686.6 per cent on a sequential basis. PPOP and PAT may post double digit growth on a yearly comparison.

YES Bank's loans grew 13 per cent YoY to Rs 2,046 billion and its deposits were up 10.6 per cent YoY to Rs 2,180 billion, said JM Financial. It sees its NIMs at 2.7 per cent, best in the last eight quarters.

Kotak Institutional Equities has given YES Bank a 'reduce' rating with a fair value at Rs 16, while JM Financial has 'hold' rating for it with the same target price. However, other analysts, decoding the technical charts are positive on the lender in the short term.

Shares of YES Bank rose another 4 per cent to Rs 17.34 on Wednesday, before trading at Rs 16.68 at 11.00 am. Shares of the private lender settled at Rs 16.65 on Tuesday, rising 10 per cent during the previous session. However, the stock is about 33 per cent lower from its 52-week high at Rs 24.75.

YES Bank on its daily charts, has broken out of its falling trend line with volume, indicating a short-term reversal. It can be observed that the stock has closed above its 50-DMA and has just managed to close at its 200 DMA, with positive crossover supporting the bullish stance, said Sujit Deodhar, Head Technical Analyst at Wellworth Share & Stock Broking.

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Technical indicator RSI has seen a positive divergence on this stock and that could trigger a short-term rally. So, from a trading perspective, if one wants to trade YES bank, then the view is to go long on this stock at current levels of Rs 16.65 & on dips to the levels of Rs 15.30, for an upside target placed Rs 18.50 and Rs 21 levels, with a protective stop loss below Rs 14.40, he said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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