Yes Bank investor? You just lost a massive amount of money; should you, or others, buy?

Beleaguered Yes Bank shares closed at Rs 180.55 per piece, down by Rs 17.80 or 8.97% and it even touched the intraday low of Rs 168.60. Intra day, Yes Bank shares even dropped by as much as 15 % at one point. The reason behind the weak faith in Yes Bank share price was due to the bank's negative performance in FY19 (Q2FY19).

The bank recorded a net profit of Rs 964.70 crore in Q2FY19, which was down by 3.79% from Rs 1,002.73 crore in the corresponding period of previous year. Interestingly, the quantum of loss in Yes Bank Q2FY19 net profit was down even more by 23.45% compared to net profit of Rs 1,260.36 in Q1FY19. Another reason for the weak performance is due to the uncertainty that its co-founder Rana Kapoor has been asked to quit after RBI set a deadline that it refused to delay or revoke.

Yes Bank net profit declined 3.8% y-o-y to Rs 964.7 crore, which includes impact of Rs 252.2 crore of one time MTM provisioning, predominantly on Corporate Bonds. After excluding investment related MTM provisions and Profit on Sale of investments Adjusted Net profit grew by 36.2% y-o-y.

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On the other hand, the Net Interest Income of the bank came in at Rs 2,417.55 crore in Q2FY19, which was up by 28.24% from Rs 1,885.09 crore in Q2FY18, and higher by 8.94% in Q1FY19. Provisions of Yes Bank came in at Rs 939.98 crore which more than doubled compared to Rs 447.06 crore in Q2FY18. The provisions were up by 50.24% from Rs 625.65 crore in Q1FY19. 

Moreover, gross NPAs were at Rs 3,866.08 crore in Q2FY19, increasing by 42.11% from Rs 2,720.34 crore in Q2FY18 and also surging by 36.87% as against Rs 2,824.46 crore in Q1FY19. Surprisingly, in percentage terms, gross NPA was at 1.60% IN Q2FY19 versus 1.82% in Q2FY18 and 1.31% in Q1FY19. 

As per PhillipCapital analyst Sujal kumar and Manish agarwalla, YES Bank reported Pre-provision operating profit of Rs 23.7 bn (+24% year on year) in line with their estimates, while revenues were in line, operational expenditure was slightly better.  

The duo added, "The Bank currently trades at 1.3x FY20E Book value which reflects the concerns over multiple challenges that the bank is facing. We thus maintain our Hold rating on the stock with revised PT of 225."

The analysts expect the loan growth to moderate and loan book to grow by 26%/19% for FY19/20 vs the earlier estimate of 32%/27% . The bank has also increased their provision estimates assuming worst case scenario for IL&FS exposure. Overall earnings estimate are cut by 14%/24% for FY19/20 and expect earnings CAGR of 16% over FY18‐21, resulting in a FY21 RoE of 15%, said Phillip Capital. 

In Sharekhan's view,  Yes Bank has posted mixed results for the quarter with impressive growth on one hand and weakening of asset quality on the other. Also exposures to certain segments may keep asset quality outlook dicey. Mark to market losses worth Rs 186.8 crore will be amortized as per RBI dispensation. 

It says that the bank also plans to raise PCR levels which effectively could impact near term bottom line, though balance sheet strengthening will be a positive. Going forward, the pending succession issue will likely impede capital raising plans, and thus result in growth challenges in the near term. Hence, the analysts maintain BUY with a revised target price to Rs 380 (from Rs 460) translating into an implied P/adjusted BVPS of 2.2x FY21.