Shares of private lender Yes Bank on Monday were trading over 4% higher on the BSE at ₹13.6 per share in early deals after the bank reported an over four-fold jump in net profit at ₹207 crores for the quarter ended June as compared to ₹45 crores in the corresponding quarter of the previous fiscal on the back of lower provisions and robust other income. The bank said this was its highest net profit since December 2018. Its provisions fell 41% to ₹644 crores, whereas its other income rose 70% to ₹1,056 crores. Yes Bank’s net interest income (NII), the difference between interest earned and expended, stood at ₹1,402 crores, down 26.5%. On the asset quality front, the bank pared its bad loans proportion with gross non-performing assets (NPAs) falling to 15.6% of the gross advances as of June 30, 2021, from 17.3% in the year-ago period.
Those at ICICI Securities said that the GNPAs remained stable and credit cost was contained at 1.6%. The brokerage laid out key things to watch out: a sharp spike in retail slippages and retail overdue buckets; elevated stress pool with net labeled exposure at 7.4%, the restructured pool at 3%, SMA-2 at 5%, SMA-1 at 2.1%; and restrictions on network partner Mastercard to adversely impact new credit card issuances. It maintains a Hold rating on the stock with a revised target price of Rs14 (earlier: Rs16). It sees covid resurgence causing further stress, lock-in of shares, and lower float boosting value beyond fundamentals as the key risks.
With the second covid wave being a further dampener, Nirmal Bang in a note said that the overall stress levels, including the overdue book, remain a cause for concern. ”We maintain a negative outlook on the bank given that credit cost is expected to remain elevated and growth could remain challenging as improving the asset quality would consume most of the management’s bandwidth,” it said. The brokerage has a ‘Sell’ rating on the stock with a target price of ₹12 per share.
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