Yes Bank Share price: Investec cuts target price to Rs 19 from Rs 20

Yes Bank Share price today: Yes Bank reported standstill and SMA2 numbers which are in line with previous expectations of 6% slippages and 5% restructuring to fully account for the legacy and covid related stress. Investec believes that Yes Bank’s CET1 should remain above 12% even if the entire stress were to be absorbed over the next 5 quarters. The closing price of Yes Bank yesterday was Rs 16.05, down Rs 0.20 or 1.2%.

Investec says Liabilities continue to improve continuously with CD ratio now at 116% and deposit growth strong at 7.7% QoQ for Yes Bank. While Yes Bank balance sheet remains stable, profitability will take time to improve as Investec continue to build higher credit costs due to economic uncertainty.

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However, in addition to this, Yes Bank reported SMA1 of 5.7% (excl restructuring including above) which is inline with the system average and similar to peer banks (3-5% range). Given the uncertain economic conditions, Investec built elevated slippages and credit costs even for FY22e to absorb this stress.

Operational performance both on operating profitability and deposits mobilization remain strong, while the positive “one-offs” of recoveries & treasury income are higher than negative “one-offs” of interest reversals. Investec reduced the target price to Rs19 (from Rs20) and retained a Hold rating on Yes Bank.

Yes Bank have also disclosed additional 5.7% of book as SMA1 which is in line with the pre-covid level and likely to be in line with peer bank average as per our expectations. Nevertheless, the economic uncertainty forces us to build elevated credit costs of 3% to factor the uncertainty created by SMA1 book.