Yes Bank shares: Should you buy, sell, reduce post better-than-expected Q1 results?

25 Jul , 2022 By : Kanchan Joshi

Yes Bank reported 50% increase in net profit at Rs311 crore for the first quarter ending June 2022 on the back of the fall in provisions for bad loans, and healthy income growth. The bank had clocked a net profit of Rs207 crore in the year-ago period.

The lender reported a 32% year-on-year (YoY) jump in net interest income (NII) to Rs1,850 crore at the end of the June quarter whereas net interest margins (NIM) marginally reduced to 2.4% during Q1FY23 from 2.5% in the previous quarter. Its total provisions declined 62% year-on-year to Rs175 crore as of June end, primarily aided by lower slippages.

Yes Bank's asset quality saw an improvement in the first quarter as gross non-performing assets (NPAs) as a percentage of total assets stood at 13.40% in Q1FY23 as against 13.9% in the fourth quarter of last fiscal. The bank’s Net NPA ratio also improved to 4.2% in Q1FY23 as compared to 4.5% in Q4FY22.

Brokerages on Yes Bank shares

“Yes Bank posted a strong outperformance with PAT up 50% YoY, outclassing our estimate. This is attributable to lower credit cost and resilient NIM. We are increasing FY23E/FY24E EPS by 40%/17% building in higher NIM and lower provisions. Even so, the FY23E RoA at 0.6% remains lower than the guided 0.75% as we anticipate slower CASA amid rising rates. Accordingly, our target price rises to Rs12 (from Rs11), factoring in higher earnings and transfer to ARC," said brokerage Edelweiss while maintaining ‘Reduce’ stance on the bank stock.

The ARC transaction is expected to help reduce on-balance sheet stress and enable the bank to focus its management efforts on business growth. The bank is confident of delivering 15% credit growth in FY23, highlighted another brokerage Nirmal Bang.

“Despite the overall better-than-expected results and an improving overall picture at the bank, we find medium-term ROA targets unattractive given the investable opportunities available with larger banks. We maintain Sell on Yes Bank shares with a target price (TP) of Rs13.4," Nirmal Bang added.