After India's major private sector lender Yes Bank reported it's first ever quarterly loss of Rs 1,607 crore in the latest Jan-Mar 19 period, analysts say that the path ahead remains challenging
After India’s major private sector lender Yes Bank reported it’s first ever quarterly loss of Rs 1,607 crore in the latest Jan-Mar 19 period, analysts say that the path ahead remains challenging. Notably, Yes Bank posted its first quarterly loss on the back of a fall in non-interest income and a sharp increase in provisioning for bad loans, mainly due to defaults by the Infrastructure Leasing & Financial Services (IL&FS) group and Jet Airways. In the same period previous fiscal, it had reported a net profit of Rs 1,179 crore in the fourth quarter of FY18.
Taking stock of the latest quarterly results, Prabhudas Lilladher said that the latest earnings were disappointing on back of management recognizing large NPAs of Rs 3,480 crore from Jet Airways loan, Infra and Real Estate and identifying standard stress assets of Rs 10,000 crore from corporate groups in real estate, entertainment and infra sectors, which recently have seen sharp credit deterioration, noted the report. Prabhudas Lilladher has a target price of Rs 190 on the stock, with a ‘Reduce’ rating.
According to Emkay Global, while CEO Ravneet Gill has announced a strategy to granularise the asset/liability business with an uncompromising focus on regulatory compliance/governance along with strengthening the risk management architecture, it will be a long drawn process with high execution risks. Emkay Global has downgraded the stock to sell, with a target price of Rs 155.
On back of lower capital, Yes Bank will look to raise capital as it completely restricts growth, but post raising capital (approvals of $1bn raising), bank should grow at 15-20% on-year, according to Prabhudas Lilladher. Also, risks still remain high from standard loan book mainly on real estate and some large groups which are seeing lately higher downgrades in rating, added the report further.
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