Should You Buy The Stock Of Yes Bank? Here’ s What This Brokerage Is Saying
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Should you buy or sell the shares of Yes Bank?
Emkay Global has a sell rating on the stock of Yes Bank. In fact, the firm sees a solid 25% downside risk on the stock of Yes Bank. It believes the stock could slide to levels of as low as Rs 10, from the current levels of Rs 13, which means a fall of 24.8%, which can be huge. In any case, the markets are at near peak levels and given that the shares of Yes Bank are highly volatile, only brave investors could be buying.
According to Emkay Global, after a heavy loss in Q4FY21, Yes Bank returned to profitability in Q1FY22 with a profit of Rs 2.1 billion, mainly led by higher other income and lower provisions. The brokerage firm is of the opinion that the bank should prefer upfront stress recognition and a higher provision cover instead of token profits. This is a good key concern that Emkay Global has pointed out as far as the bank is concerned.
Credit growth remains weak, margins sub-par
According to the brokerage the credit growth was weak at Rs 1.7 trillion (down 0.5% yoy/2% qoq) mainly due to corporate drag. Retail growth was high at 31% yoy due to a low base.
“Yes Bank expects 20% growth in retail in FY22; however, asset quality remains a concern in this portfolio. Deposit growth was high at 39% yoy (Rs1.6 trilllion) due to a low base after last year’s scare. Current and Savings Account stood at 27%, but it was still far from its peak (38%). In our view, the road ahead will be challenging since even larger private banks are facing challenges on the CA front. The bank has also cut SA rates recently, which may impact SA mobilisation. Net Interest Margins improved by 50 bps qoq to 2.1% due to lower interest reversal on NPAs/interest waiver, but remained sub-par vs. past trends. The bank has guided for 15% credit growth and expects margins at 2.8%, which looks optimistic,” the brokerage has said.
Elevated asset quality risk remains for Yes Bank
According to Emkay Global, fresh slippages remained high at Rs 22 billion (5.4% of loans), mainly from corporate (Rs 12.5 billion) and retail (Rs7.6 billion).
Emkay Global expects the bank’s RoA trajectory to remain sub-par at 0.5-0.8% over FY23-24E vs. management expectation of 1-1.5%. “We retain Sell with a target price of Rs 10 (0.9x Sep’23E ABV) amid persistent concerns over its asset quality, sub-par return ratios, and unfavorable risk-reward ratio with higher valuations. Although the current management with regulatory/investor support has been able to avert bank failure, we believe that reorienting Yes Bank to a sustainable retail bank will require differentiated private banking management,” the brokerage has said,
Disclaimer:
The stock recommendation of Yes Bank, is picked from the brokerage report of Emkay Global Financials. However, neither the author, nor the brokerage, nor Greynium Information Technologies should be held responsible for decisions taken and losses incurred based on the above article. Investors should understand that there are inherent risks involved when investing in the markets. They should hence exercise due caution.
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