Stocks of YES Bank rose nearly 5% on Friday despite a sharp decline in the Sensex and the Nifty. YES Bank stocks gained 4.98% after falling for 6 consecutive days. Its shares closed at Rs. 15.80. Stocks had been declining since the bank released its December quarter results. Whereas, the bank posted a profit of Rs 150.7 crore in Q3 and grew its net profit by 16.5% over the September quarter. But despite the good results and the rise in bank stocks, the country’s leading brokerage firms have advised investors to keep away from the purchase of YES Bank stocks. These brokerage firms fear that YES Bank share prices may fall further.
Brokerage firm ICICI Securities said YES Bank’s December quarter results may have benefited the bank, but Q3 results have raised serious questions over the bank’s asset quality and the bank’s portfolio looks risky. ICICI Securities said in a note that the bank’s non-performing loans (NPLs) have risen from 1.5% to 5%. Its SMA-2 loan pool increased from 2.4% to 4% and SMA-1 loan pool increased from 1.6% to 7.3%. At the same time, in addition to this pool, the additional loan restructuring of the bank is more than 3.2% and the lebld NPA of the bank is 22%. In this case, the brokerage firm has given Hold ratings to YES Bank stocks and revised its target price to Rs 16.
Emkay Research sets target price at Rs 11
At the same time, brokerage firms Emkay Research said that Yes Bank stocks will fall further. This brokerage firm has given the Bank Stocks Sell ratings and set its target price at Rs 11. Emkay Research said that despite having a profit of Rs 150.7 crore in Q3, the bank’s return ratio is not satisfactory. Also, its valuation is also high and its risk-reward is also not favourable. The brokerage firm said that Yes Bank may have resumed the bank to some extent with the help of new management and RBI, but other types of private management is needed to make it a profitable retail bank.
Bank’s stress pool 11 percent of the total loan
Emkay Research said in its report that the bank’s NPA has decreased due to the Supreme Court’s ban in Q3. However, the stress pool of the bank is 11% of its total loan ie Rs 18.5 crore which shows that its asset quality is still at risk. With this, the bank has restructured its 4.1% loan, which is more than any bank in the country. Apart from this, the bank is yet to get independent ARC approval to manage and transfer its stressed assets.
Elara Capital set the target price at 6 rupees
Elara Capital, another brokerage firm, has set a target price of only Rs 6 for Yes Bank stocks. Elara Capital says that its stocks may fall below Rs 6. The brokerage firm said that the bank’s new stressed loans stood at 17%, while its total outstanding stress loans increased from 29% to 39%. Even though the bank’s pre-tax profit (PAT) is Rs 150 crore on a quarterly basis, it has fallen by 101% on a yearly basis. The asset quality of the bank has declined further. Bank deposits grew 8% on a quarterly basis, but bank deposits declined 12% year-on-year. Because of this, Elara Capital has given Sell ratings to Yes Bank stocks.