Yes Bank Share price today: Investec reduces target price to Rs 19

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. 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 retain Hold rating on Yes Bank.

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

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.

The Nifty opened with gains and has been trading with a positive bias since then. Currently, it is trading with gains of 115 points. On the hourly charts, we can observe that the Nifty has been trading in an upward sloping channel. Prices are trading along the expanding upper Bollinger Band, which indicates that positive momentum is likely to continue. 

The hourly momentum indicator is bearing a positive crossover, however we can observe that a divergence is developing as a new high in prices is not accompanied by the momentum indicator and is a sign of concern. Unless we see weakness in prices, the positive momentum is likely to continue. In terms of levels, 15250-15300 shall act as immediate resistance zone, while 15130-15100 shall act as a support zone for the Nifty.

On the hourly chart, the Nifty is trading above the 20-hour moving average (HMA) and the 40-HEMA, of 15031 and 14843, respectively. The hourly momentum indicator has a positive crossover. Market breadth is positive with 1046 advances and 743 declines on the National Stock Exchange (NSE).