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Thursday, December 2, 2021

Yes, brokerage firms reduced bank ratings due to increase in bank’s stress book, yet bank stocks rose 10% in 2 days

Yes Bank stocks have gained nearly 10% in the last two trading sessions. On Friday, where the bank’s stock gained 4.98% and its shares closed at Rs 15.80. At the same time, the shares of the bank closed at Rs 16.50, up 4.76% today. Also, Yes Bank had a net profit of Rs 150.7 crore in Q3 of FY 2020-21. Its net profit rose 16.5% over the September quarter, but despite better results and a pick-up in bank stocks, the country’s leading brokerage firms have downgraded YES Bank’s ratings from buy-and-sell.

However, the cost-to-income ratio of YES Bank’s stock has declined and has improved to 39.2%. The management of YES Bank stated that the bank’s stressed pipelan stood at Rs 18,500 crore in Q3, which is 10.9% of its total loans. This amount is almost double from the September quarter. Brokerage firms say that YES Bank is expected to remain in the earnings negative. For this reason, brokerage firm Anang Rathi has dropped the ratings of YES Bank to Sell (Sell) and set a target price of Rs 14 for its stocks. YES Bank’s stress book increased 106% over the September quarter.

Bank’s portfolio full of risk

Earlier, brokerage firm ICICI Securities had said that even though YES Bank’s December quarter results had benefited the bank, Q3 results have raised serious questions over the bank’s asset quality and the bank’s portfolio looks risky is. 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%.

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 Sell ratings to the stocks of the bank and has set a target price of 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 are needed to make it a profitable retail bank.

Bank’s stress pool 11 percent of 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 i.e. Rs 18,500 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.

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Shehnaz is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing about Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.
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