Yes Bank Ltd shares tumbled nearly 7% in intra-day trade on Friday after surging over 24% in the previous session. Sentiment was muted as investors feared further slippages in the earnings for the second quarter ended September (Q2) to be announced later in the day, while brokerages also didn’t seem too pleased with the $1.2 billion binding offer received by the bank.
At 12:02 pm, shares of Yes Bank were trading at Rs 67.30, down 4.4%, after hitting the day’s low of Rs 65.55. Notably, the stock has recovered over 110% in the last one month.
Analysts are expecting Yes Bank to post a net loss in the September quarter. Edelweiss Securities said it expected the bank to post a loss of Rs 1,907.30 crore in the September quarter compared with a profit of Rs 964.70 crore in the year-ago period. “We expect asset quality and credit cost to throw up negative surprises with higher than guided range. Also, deposits will witness a QoQ dip of 8% along with a loan growth decline of 4-5%. Fee income trends will be volatile and higher slippages will weigh on margins,” Edelweiss said in a report.
Prabhudas Lilladher also expected Yes Bank to see an 89% year-on-year fall in profit and a 4.5% decline in net interest income (NII) in the second quarter.
In a separate development, Yes Bank on Thursday announced that a global entity has made a binding offer to invest $1.2 billion in the cash-starved lender through fresh issuance of equity shares, subject to regulatory, board and shareholders approvals. However, it did not reveal the identity of the global entity.
Brokerages, however, were not too excited about the announcement. Morgan Stanley said the development was positive, but it also noted that since Yes Bank has very high exposure to stressed sectors, it will take time to get on the track.
The brokerage house said Yes Bank lacks a strong retail franchise, so the risk-reward is unattractive. It remained ‘underweight’ on the stock, maintaining the stock’s target price at Rs 55.
Another brokerage house Nomura also said that the large capital raise could address the ongoing concern risk, however, sustainable pre-provision operating profit and loss given default (LGD) will be the key considerations for the investors over the next two years.
It further noted that a $1.2 billion capital raise, assuming the stock price at Rs 60, will imply a 50% dilution in the shareholdings of the lender. Nomura maintained its ‘neutral’ stance on the lender, with a target price of Rs 110 per share.
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