There are some initial signs of recovery but uncertainty around corporate book stress build-up, selling restrictions on private banks and an uncertain operating environment preclude any meaningful assessment of business direction and residual net worth valuation, said Edelweiss Securities.
Nirmal Bang Institutional Equities said: “Investment case remains unconvincing” while Emkay Global said “the risk-reward ratio stays unfavourable.”
“We expect the bank’s RoA trajectory to remain sub-par at 0.5-0.8 per cent over FY23-24 compared with the management expectation of 1-1.5 per cent. We retain ‘sell’ with a target of Rs 10. Although the current management with regulatory and investor support has been able to avert bank failure, we believe that reorienting YES Bank to a sustainable retail bank will be a tall task,” Emkay said.
Analysts corroborated the view of former SBI chairman Rajnish Kumar, who recently said that the bank may take two more years to stabilise.
The private lender reported a 74.3 per cent YoY growth in net profit to Rs 225 crore for the quarter ended September quarter, even as its net interest income (NII) fell 23.4 per cent YoY to Rs 1,512 crore.
What boosted the bottom line was a sharp decline in provisions. YES Bank’s provisions for bad loans declined 65 per cent year-on-year to Rs 377 crore but at the same time the restructured pool has expanded to Rs 6,100 crore, accounting for 3.6 per cent of loans compared with 3 per cent in June quarter.
Fresh slippages remained high at Rs 1,700 crore, 4.3 per cent of loans. This was mainly on account of corporates (Rs 750 crore), including Future Retail and few real estate corporates.
Retail slippages were also high at Rs 890 crore. Gross NPA ratio improved 63 bps sequentially to 15 per cent due to upgrades of Rs 970 crore led by restructuring, recovery of Rs 300 crore and write-offs of Rs 270 crore.
For H1FY22, total recoveries stood at Rs 3,260 crore, with the bank expecting improvement in asset quality as recoveries materialise over the coming quarters. The management was confident of exceeding its own target of Rs 5,000 crore in recoveries in FY22.
“Deposit accretion is tracking well with overall deposits showing healthy growth despite cutting down on rates. Credit growth seems to be normalising as the bank realigns its portfolio mix towards retail and MSME. Though slippages have been coming down, likely pointing towards subsiding asset quality pressure, we remain wary of the elevated NPAs which we believe will take time to reduce to a comfortable level,” Nirmal Bang said.
This brokerage has a sell rating on the stock with a target of Rs 12.5, based on 0.9 time H1FY24 adjusted book value.
“While some green shoots are visible, meaningful recovery will require strenuous effort, consistency and some macro tailwind. There is still a long way to go. Though capital raising is past, deposit accretion and asset quality are the key elements to monitor, not to mention stakeholder confidence. Evolution’s focus over the next two–three years is very much an open question; that, in our opinion, lies more in the realm of speculation than analysis,” Edelweiss said while keeping the stock ‘under review’.
