Last updated: January 26, 2023, 2:50 PM IST
Yes Bank shares fall; Should you hold or sell?
Yes Bank Shares: According to stock market experts, this dip in Yes Bank shares is short-lived as the big bank is expected to recover from its lows
Yes Bank Share Price: Shares of YES Bank were under pressure after rising to a 52-week high of Rs 24.75 on Dec 13, 2022. In this nearly one-month span, shares of Yes Bank are down 30 percent, while YTD-time it’s down more than 16 percent.
According to stock market experts, this dip in Yes Bank shares is short-lived as the big bank is expected to bounce back from its lows. The drop came after the Bombay High Court overturned the YES Bank administrator’s March 2020 decision to write off additional Tier-1 bonds (AT1). An 80 percent drop in December’s quarterly profit due to higher provisions contributed to the weakness on the counter. YES Bank had written off AT-1 bonds worth Rs 8,415 crore as part of the bailout in March 2020. While management said it has strong legal grounds to appeal against the court, investors were cautious.
ICICI Securities gives Yes Bank shareholders the option of holding on to the scrip despite a 30 percent drop from its 52-week high. . Following the stressful sale of the pool, the adjusted book value (adjusted for net NPAs) was favorably impacted by 8-10%, despite lower earnings accrual for FY23E. The ₹89 billion capital raise in Q3FY23 from Carlyle and Advent also provides YES growth and confidence capital. To that extent, the stock can now command a valuation of 1.4x FY24E ABV (previously 1.2x).
ICICI Securities pointed to the challenges that Yes Bank shares may face, saying: “We remain aware of the risks arising from the delay in the settlement of a stressed pool, incremental provisions related to obsolescence, a modest RoE profile during the transition, decision to write off AT-1 bonds being challenged in court and overhanging stock after the expiry of the lock-in shares on March 23. Maintain HOLD with a revised target price of ₹19 .3 per share.”
Meanwhile, Nirmal Bang Institutional Equities said in a note: “Management indicated that the bank is in the process of appealing to the Supreme Court against the recent Supreme Court order that overturned the write-down of additional tier 1 bonds (AT 1) issued by the bank. We have taken a ‘close look’ at the bank as we seek further insight into the provisioning implications of securities receipts that could affect profitability going forward.”
Kotak Institutional Equities said YES Bank’s 80 percent year-over-year profit decline was largely due to higher provisions.
“The bank completed the sale of bad loans to the ARC, which resulted in a significant reduction in overall NPL ratios and also raised capital for growth. We are shifting focus to growth and normalization of RoEs. The recovery to normality looks set to take a few more years, with negligible credit costs being the only significant leverage,” it said, maintaining the sale of the shares at a fair value of Rs 17 from Rs 16 earlier.
Yes Bank’s quarterly consolidated profit came in at Rs 55.07 crore as provisions for old bad assets caused higher amounts to be set aside as provisions. It reported an 11.7 percent rise in core net interest income at Rs 1,971 crore on the back of 10 percent growth and a 0.10 percent rise in net interest margin at 2.5 percent.
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