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Synopsis: YES Bank shares rallied nearly 10% following impressive YoY earnings growth. The gains were propelled by lower provisions and strong operating performance. However, Kotak Institutional Equities advised caution, citing retail loan stress and unchanged net interest margins (NIM) as areas of concern. With a "SELL" rating, Kotak's revised target price is Rs18, signaling potential volatility ahead. Investors should monitor asset quality trends and the bank’s progress in improving loan performance and cost efficiencies.
Shares of YES Bank surged nearly 10% recently, hitting a high of Rs21.29 on the BSE. The rally was driven by the bank’s report of a 2.5x year-on-year (YoY) increase in earnings, attributed to a 40% decline in provisions and a 20% growth in operating profit. Despite this, the stock remains down 7.9% year-to-date.
Key Performance Highlights:
Earnings Growth: Strong YoY earnings growth aided by lower provisions and increased operating profit.
Slippages & Asset Quality: Slippages were driven by retail loans, with gross and net NPA ratios stable at 1.6% and 0.5%, respectively.
Loan Performance: Slippages from SMEs were lower, with minimal issues in mid-corporate loans. Provision reversals in investments contributed to lower credit costs.
Deposit Growth: YES Bank saw robust deposit mobilization, with 30% YoY growth in CASA deposits.
Kotak Institutional Equities' Perspective:
Despite positive earnings, Kotak remains cautious, maintaining a "SELL" rating. The brokerage expressed concerns over stress in the retail loan book, which might offset the positives. Kotak revised its fair value estimate to Rs18 per share, citing volatility and the need for improvement in loan quality.
Disclaimer: The information provided here is for educational purposes only and does not constitute financial advice. Please consult a qualified professional before making investment decisions.
