Yes Bank shares tumbled as much as 27% to Rs173 on BSE in early trade on Tuesday as brokerages downgraded the stock price target by as much as 40%. The bank had on Friday reported the highest ever quarterly loss of Rs1,507 crore for the period ended March on the back of provisions against bad loans. The stock was trading at Rs180.20, down 24%, at 9:30am.
Australian brokerage Macquarie on Monday admitted to overlooking the risks from the structured finance business of Yes Bank and downgraded the stock by a full two notches. The brokerage firm announced a double-downgrade of the Yes Bank stock to ‘underperform’ and also slashed the stock price target to Rs165 over the next 12 months.
Axis Capital downgraded the stock to ‘sell’ from ‘buy’ with a target price at Rs205 from Rs240 per share. The research house said, “There are multiple challenges lying ahead. Growth will be slow with focus on retail and SME (small and medium enterprises).”
Prabhudas Lilladher downgraded the Yes Bank stock to ‘reduce’ from ‘accumulate’, with a target price of Rs190 from Rs245. “Significant worry comes from collapse of fee income, higher credit cost and risk of NIMs (net interest margins) going down; leading to an infinite loop of lower return ratios,” said the brokerage house.
Emkay Global also downgraded the stock from ‘hold’ to ‘sell’ and cut is target price by 40.5% to Rs155. “We like the business strategy of its new managing director Ravneet Gill, to granularise the asset/liability business, uncompromising focus on regulatory compliance/governance and strengthening the risk management architecture, but it will be a long drawn process with high execution risks,” said Emkay Global.
Sharekhan, however, had a contrarian view. The brokerage firm said it maintained a ‘Buy’ rating on the Yes Bank stock, with a revised price target of Rs275. Changes in business model, mix and strategy may see growth and return ratios moderating for a near to medium term, it said. But the key notable in the near term, may be a more pragmatic and calibrated business growth with more focus on improving risk management and quality of disclosure, are steps in the right direction, it added.
Yes Bank on Friday said net interest income, the difference between interest earned and interest expended, grew by 16.3% year-on-year to Rs2,506 crore with credit growth at 18.7%, but net interest margin contracted by 30 basis points.
Provisions and contingencies shot up significantly to Rs3,661.7 crore in quarter ended March, a massive increase of nine times over corresponding period last year and 6.6 times compared to the previous quarter. Yes Bank said it had created contingency provision of around Rs 2,100 crore pursuant to a review of the credit portfolio.
Yes Bank also reported gross slippages for March quarter at Rs3,481 crore. “Of which Rs 552 crore was on account of an airline company exposure that was performing as on March 31, 2019 and Rs529 crore on account of stressed infrastructure conglomerate,” it said.