Explained: Why Yes Bank Shares Tumble By 3% After Q1FY24 Figures?

Private sector lender, Yes Bank shares were in a bloodbath on Monday, nosediving by around 3%, despite registering double-digit growth in Q1FY24 PAT. Yes Bank's stock is under pressure after the lender's NII and operating profit, and advances declined sequentially in Q1. Also, the recovery in the lender's earnings is slow, and experts believe the performance is likely to be volatile going ahead. Currently, Yes Bank's shares traded near its day's low.

At the time of writing, Yes Bank's share price traded at Rs 17.56 apiece, tumbling by Rs 2.8% on BSE. The stock has shed at least 3.05% with an intraday low of Rs 17.51 apiece on the exchange.

At the current market price, Yes Bank's market cap was around Rs 50,466 crore.

Year-to-date, Yes Bank's shares have plummeted by nearly 19% on BSE. However, in a year, the stock has climbed by over 23%.

In Q1FY24, Yes Bank's PAT stood at Rs 343 crore, rising by 10.3% YoY and 69.2% QoQ. Net interest income stood at Rs 2,000 crore, up by 8.1% YoY but lower by 5% QoQ. Net interest margin came under pressure by contracting to 2.5% compared to 2.8% in Q4FY23. Advances were at Rs 200,204 crore, higher by 7.4% YoY but lower by 1.5% QoQ. Deposits climbed by 13.5% YoY but saw a marginal upside of merely 0.9% sequentially to Rs 219,369 crore.

As of June 30, 2023, gross NPA stood at 2% as against 2.2% in Q4FY23 and 13.4% in Q1FY23. Net NPA was at 1% expanding slightly from 0.8% in Q4FY23, but sharply lower from 4.2% in Q1FY23.

In its research note, Kotak Institutional Equities said, "Yes Bank reported 10% yoy earnings growth due to higher provisions, which offset ~40% yoy growth in operating profits. Slippages were marginally higher but higher write-offs kept headline NPL ratios marginally lower qoq. Our investment thesis remains unchanged as normalization of return ratios is still some time away with the underlying drivers (NIM or cost ratios) yet to turn meaningfully positive."

According to the brokerage, the bank is likely to see a period of volatile earnings.

"As resolution of the previously recognized NPLs gains traction, the contribution would have impact in many parts of the P&L. However, the overarching theme on the bank remains unchanged. The bank has progressed well on liabilities and its capital position, which implies that we have moved our focus towards operational performance," it added.

Further, the note said, "The bank has multiple challenges as it lacks a high-yielding portfolio where it has some degree of dominance to offset the high funding costs. Further, the investments continue to granularize its assets and liabilities and these transitions are long-term and expensive resulting in an unfavorable cost and return structure. As seen in the past with several lenders, any attempts to accelerate growth results in a high credit cost cycle that brings down valuation multiple making it harder to consistently raise capital for growth."

Hence, in the brokerage's view, the bank is yet to break this cycle. It has a tailwind on credit costs as the resolutions of the past cycle can keep it low but this advantage is not a structural one to command a higher multiple.

Thereby, the brokerage said, "We maintain REDUCE with a FV at Rs17 (from Rs16 earlier), valuing the bank at ~1X book and 15X FY2025 EPS for RoEs that are still

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.