Yes Bank Shares Fall 4% Post-Q1 Results as Nuvama and Other Brokerages Weigh In.

In the latest trading session, shares of Yes Bank declined by 4%, closing at Rs 22.70 despite reporting a remarkable standalone net profit of Rs 1,070.99 crore for the April-June quarter of FY27, which marks a substantial 34% YoY increase from Rs 801.07 crore in the same quarter last year. The bank’s net interest income also recorded a solid jump of 17.5% YoY, rising to Rs 2,786.46 crore, compared to Rs 2,371.47 crore the previous year. However, the market reaction appears to be tempered by lingering concerns over asset quality and provisions.

Yes Bank’s asset quality exhibited a year-on-year improvement, although it faced sequential challenges with non-performing assets (NPAs). As of the end of the quarter, gross NPAs stood at Rs 3,705 crore, down from Rs 4,022 crore a year prior, yet up from Rs 3,605 crore in the previous quarter. The gross and net NPA ratios remained stable at 1.3% and 0.2%, respectively. Yet, provisions surged by 39% YoY to Rs 394 crore, primarily due to slower special recovery (SR) recoveries and heightened staff costs, which contributed to the bank’s profit falling short of forecasts by 6%.

Market analysts from Nuvama have maintained a ‘Reduce’ call on Yes Bank, setting a target price of Rs 22 per share, indicating a downside potential of nearly 7%. They highlighted the importance of monitoring factors such as the court’s ruling on the AT1 bond issue and a potential increase in stake by SMFG. Meanwhile, JM Financial slightly adjusted its position to ‘Reduce’ from ‘Sell’, albeit with the same target price of Rs 22, emphasizing that while core operating trends are improving, uncertainty surrounding future SR recoveries remains a significant concern for investors.

Looking ahead, management aims for a return on assets (RoA) of 1% in FY28, which indicates a positive growth trajectory. However, ongoing scrutiny of asset quality and recovery metrics will be crucial for guiding investment decisions. In summary, despite strong quarterly results, the elevated provisions and uncertain recovery landscape necessitate a cautious approach for potential investors in Yes Bank.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)