YES Bank tanks 30% after Rs 1,507-crore March quarter loss

The bank made total non-tax provisions of Rs 3,662 crore,, more than nine times the Rs 400 crore reported a year earlier

YES Bank shares tanked 30 per cent to Rs 167 on the National Stock Exchange (NSE) on Tuesday after the bank reported a whopping Rs 1,506 crore net loss for the March quarter (Q4FY19) as provisions soared over nine times. The private sector bank posted its first-ever quarterly loss during the quarter. It had posted a profit of Rs 1,179 crore in the year-ago period.

YES Bank recorded its sharpest single day fall since listing on July 12, 2005. Investors lost Rs 16,316 crore in terms of market capitalisation after a sharp fall in stock price today.

The bank's net interest margins (NIM) dropped 30 bps to 3.1 per cent on account of higher slippages during the quarter. It made total non-tax provisions of Rs 3,662 crore, more than nine times the Rs 400 crore reported a year earlier and nearly seven times the Rs 550 crore reported in December 2018.

During the quarter, the bank’s asset quality deteriorated due to higher slippages from airline account, infra account and real estate sector. The gross non-performing assets ratio more than doubled to 3.22 per cent from 1.28 per cent in the year-ago period and 2.10 per cent in the preceding quarter.

Analysts have downgraded the shares of YES Bank following the announcement of its March quarter results. Analysts have cut their 12-month price target by as much as 40 per cent and scaled back their earnings growth forecasts by up to 45 per cent for FY20 and also FY21. Large stressed pool, aggressive accounting practices and weakness in the retail franchise are among the reasons cited by analysts for their bearish stance. 

“YES Bank’s earnings were disappointing on back of management (likely on conservative CEO) recognizing large NPAs of Rs 3,480 crore from airline, infra and real estate and identifying standard stress assets of Rs around 10,000 crore from corporate groups in real estate, entertainment and infra sectors, which recently have seen sharp credit deterioration,” analysts at Prabhudas Lilladher said in result update.

Significant worry comes from collapse of fee income in near term, higher credit cost if more risks arise from unidentified stress and risks of NIMs going down on higher interest reversals if stress book falls into NPA, leading to an infinite loop of lower return ratios in medium term, the brokerage firm said with ‘reduce’ rating on the stock with target price of Rs 190 per share.

Near-term headwinds from new asset quality shocks, elevated credit costs, higher opex and slower growth will remain an overhang on the stock, in our view, according to Vikesh Mehta, analyst at BOB Capital Markets.

While structural changes by the new leadership are geared to building a solid franchise in the long run and are essential to restore investor confidence, any rerating of the stock will hinge on effective execution of the new strategy, the brokerage firm said in result preview. Mehta downgraded the stock with ‘sell’ rating and target price of Rs 210 per share.

At 09:18 am, YES Bank was trading 29 per cent lower at Rs 169 on the NSE, as compared to 0.14 per cent decline in the benchmark Nifty 50 index. A combined 7.47 million shares have changed hands on the counter on the NSE and BSE so far.

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