Yes Bank share price: Nirmal Bang maintains negative outlook and pegs the stock at Rs 13

Yes Bank reported an operational performance which was ahead of estimates on the back of better NIM, higher non-interest revenue and better cost control. However, these positives were more than offset by the surprise on the asset quality front. Yes bank has disclosed total stress (net of total provisions) of Rs 385.8 bn, which is 23% of the total advances and 104% of the current equity capital. Out of this stressed pool, Rs 80.6 bn is where restructuring has been invoked (not yet implemented). Share price of Yes Bank clsed at Rs 16.4 on Firday, down Rs 0.1 or 0.6%.

Nirmal Bang thinks that Yes Bank's disclosed stress levels are alarming in nature considering that the new management had guided for slippages of 7-9%. The SMA 1+2 book increased substantially, up 181% YoY to Rs 188.5 bn, forming 11.1% of total advances compared to 4%. Compared to other banks, the SMA numbers for Yes Bank are clearly on the higher side, reflecting higher slippages going forward. Pro-forma GNPA stood at 19.5-20% as of Dec '20.

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Earlier, Yes bank had stated that collections in the corporate portfolio were on the lower side. In light of the new developments on the asset quality front, Nirmal Bang have increased their NPA estimates. In the retail portfolio, collection rates have improved and now stand at 96% compared to 97% pre-Covid.

In the last update, Yes Bank had stated that the bank’s current PCR, PPOP run-rate and capital ratios would be able to absorb another 15-16% of NPA formation. Given the stress pipeline, Nirmal Bang maintains a negative outlook on the bank’s asset quality. What came as another surprise was that the bank is seeking shareholders’ approval to raise equity capital of up to Rs100bn (after having raised Rs 250 bn in CY21).

Yes bank had stated that the current capital level is sufficient enough to pursue growth for another 2-3 years. In terms of P&L, NII grew 1.4x YoY and 29.7% QoQ. Non-interest income (up 91.4% YoY and 69.4% QoQ) was buoyed by investment gains (Rs5.4bn). Given the improvement in disbursements, retail fee income also witnessed 38% growth QoQ.

Yes Bank’s Advances grew by 1.7% QoQ, driven by retail and MSME segments where disbursements (at Rs 12 bn) exceeded the internal target of Rs10bn. Corporate disbursements were subdued at Rs 20 bn and this portfolio declined by 5% QoQ. On the liabilities side, growth momentum continued with deposits growing by 7.7% QoQ. Nirmal Bang maintains a negative outlook on Yes bank and values the stock at Rs 13, based on 1.0x FY23E ABV.