YES Bank shares fall 2% after Q2 results; What Kotak said about the lender

Shares of YES Bank Ltd dropped about 2 per cent during the early trading session on Monday, after the private lender reported its earnings for the quarter and half year ended on September 30, 2023. The lender announced its earnings for the September 2023 period on Saturday.

YES Bank reported a 47.4 per cent rise in the net profit on a year-on-year (YoY) basis at Rs 225.21 crore in the September 2023 quarter, which was Rs 152.82 crore in the year ago period. However, on a sequential comparison (QoQ), the bottomline dropped more than 34 per cent from Rs 343 crore in the June 2023 quarter.

The net interest income (NIIs) of YES bank stood at Rs 1,925 crore, which was up 3.3 per cent on a yearly comparison. Net interest margins (NIMs) were down 30 basis points (bps) to 2.3 per cent down in Q2FY24. On a QoQ basis, NIMs contracted 20 bps. It clocked a total income of Rs 2,866 crore in September 2023 quarter, up 9.4 per cent YoY.

YES Bank reported 50 per cent YoY earnings growth on lower provisions, but operating profit growth was flat YoY. Slippages were higher at 2.4 per cent, but they are increasingly coming from the retail loan portfolio. NIM declined 20 bps QoQ to 2.3 per cent due to the higher cost of funds, said Kotak Institutional Equities.

Following the announcement of results, shares of YES Bank declined about 2 per cent to Rs 17.02 with a total market capitalization below Rs 49,000 crore. However, the stock dropped close to 3 per cent from day's high at Rs 17.44 at the opening tick. The stock settled at Rs 17.28 in the previous trading session on Friday.

"RoEs are still weak at 2 per cent and the path to normalized RoE or closer-to-peers is still a few years away. We have revised our earnings downward to reflect a possible slower progression in NII growth. The bank has significantly underperformed its peers, but we are still not confident if the risks are fully captured in the stock price," it said maintaining 'reduce' with a fair value of Rs 17.

The asset quality of YES Bank improved in Q2FY24 as gross non-performing asset (NPA) ratio stood at 2 per cent, while net NPA ratio stood at 0.9 per cent. Provisions and contingencies fell 14.1 per cent YoY to Rs 500.38 crore in the second quarter of the ongoing fiscal, which stood at Rs 582.81 crore in the year ago period.

Provision Coverage Ratio (PCR) of YES bank stood at 56.4 per cent, compared to 48.4 per cent in the previous quarter. PCR, including Technical write-off, came in at 72.1 per cent, as compared to 67.8 per cent. Despite the challenging environment, CASA Ratio remained stable on a sequential basis.

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