Brokerages hold cautious view on YES Bank

The brokerages held a cautious view on YES Bank despite the fact that it posted nearly 77 per cent year-on-year YoY growth in net profit at Rs 266.43 crore for the quarter ended December 31. The private sector lender's share price dropped 1.16 per cent at Rs 13.58 at around 1.06 pm IST On the other hand, the benchmark BSE Sensex was down 1.97 per cent at 57,871.

In the same quarter last year, it had reported a profit of 150.71 crore. Net interest income NII declined by 31.10 per cent YoY to Rs 1,763. 98 crore. The bank's asset quality improved marginally during the quarter gone by. Gross non-performing assets were NPA of 4.70 per cent in Q 3 FY 22 over 15 per cent in Q 2 FY 21. Net NPA fell to 5.30 per cent from 5.50 per cent on a quarter-on-quarter basis.

Emkay Global Financial Services said the bank reported a miss on earnings due to lower other income and higher expenses, while retaining a Sell rating on YES Bank. The bank hopes to launch an ARC by March June 22 to take over stressed assets from its balance sheet. The bank needs to increase provision cover instead of showing token profits, according to Emkay Global Financial Services, while setting a target price at Rs 10.

The operating profit of the lender declined by 66.40 per cent YoY to Rs 731 crore during the quarter under review. The figure went up by 7.7 per cent on a quarter-on-quarter QoQ basis. The provision was reduced by 82.10 per cent YoY and 0.70 per cent QoQ to Rs 375 crore.

We expect the bank's return on assets trajectory to remain sub-par at 0.3 0.7 per cent over FY 23 -- 24 E against management expectation of 1 -- 1.5 per cent. We retain Sell on YES Bank because of concerns over its asset quality, sub-par return ratios and unfavourable risk-reward ratio, according to Emkay Global Financial Services.

Nirmal Bang Securities also maintained Sell on YES Bank with a price target of 12.50.

We remain wary of elevated NPA levels, which underpin our negative stance on the YES Bank. The bank is in the process of setting up an ARC, which will take over a large amount of NPAs currently lying in the bank's books. The outlook on the profitability front is weak, and the ARC is expected to be fully operational by the end of June 22 1 QFY 23. Retail disbursements were up 25 per cent YoY and 10 per cent QoQ on the growth front, Nirmal Bang Securities said in a report.