Shares of India’s major private sector lender Yes Bank plunged in trade on Tuesday morning, after the firm reported its first ever quarterly loss.
Shares of India’s major private sector lender Yes Bank plunged in trade on Tuesday morning, after the firm reported its first ever quarterly loss. Yes Bank share price plunged by more than 27% to hit the day’s low at Rs 173. The represents Yes Bank’s worst fall in more than 7 months. After taking into account today’s plunge, the shares are down by more than 50% in the last one year.
The private sector lender has reported a loss Rs 1,607 crore in the latest Jan-Mar 19 period 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 comparable period previous fiscal, Yes Bank had reported a net profit of Rs 1,179 crore in the fourth quarter of FY18.
Taking stock of the results, global firm Macquarie has double downgraded the stock to ‘underperform’ from ‘outperform’ earlier. The research firm has a target price of Rs 165 on the stock, representing a target cut of 40%. Macquarie said that it cuts FY20-21 earnings EPS by 45% each. The incoming CEO flags large stressed pool. Macquarie expects a long road to redemption for Yes Bank.
According to Axis Capital, the growth will slow down significantly with focus on retail and SME. The near-term RoA target of around 1% will be lowest amongst peers. The brokerage firm has cut earnings estimate for FY20-21 by 34% and 30% respectively.
According to Prabhudas Lilladher, a significant worry comes from collapse of fee income in near-term. This could lead to higher credit cost if more risks arise from unidentified stress and risks of NIMs going down on higher interest reversals if stress book falls into NPA, leading to an infinite loop of lower return ratios in medium term, noted the research firm. Prabhudas Lilladher has downgraded Yes Bank shares to reduce with a target price of Rs190 (from Rs245) based on 1.5 times Mar-21 adjusted book value (post roll over from Sep-20).
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