Here's what leading brokerages expect from YES Bank's Q2 results

"Slippages to remain elevated including McLeod Russel, ADA-NBFC group and Cox & Kings. The bank will take mark-to-market (MTM) on DHFL bonds," said analysts at Emkay Global Financial Services

Private lender YES Bank is slated to report its September quarter earnings for FY20 (Q2FY20) on Friday, November 1 amid expectations of a loss up to Rs 1,907.3 crore due to exposure to bankrupt companies like DHFL, McLeod Russel, and Cox & Kings.

The lender reported a profit of Rs 113.8 crore in the June quarter of FY20 (Q1FY20), and that of Rs 964.7 crore in Q2FY19. The net interest income (NII) came in at Rs 2,280.9 in the June quarter of the current fiscal, which was Rs 2,417.6 in Q2FY19. Total provisions came in at Rs 1,784.1 crore in Q1FY20, while the same was Rs 940 crore in the year-ago period.

So far in the calendar year 2019, the stock has tumbled 68 per cent as against a 10 per cent rise in the benchmark S&P BSE Sensex.

Here is what leading brokerages expect:

Edelweiss Securities
 

The brokerage expects the bank to post a loss of Rs 1,907.3 crore, down nearly 300 per cent YoY and 1,777 per cent QoQ, due to weak asset quality and one-time deferred tax asset (DTA) mark-down. It further pegs the pre-provision operating profit (PPOP) to come in at Rs 1,324.1 crore, down 44 per cent YoY from Rs 2,366.4 crore clocked in Q2FY19, and 32.4 per cent sequentially from Rs 1,959.1 crore (Q1FY20).

“We expect asset quality and credit cost to throw in negative surprises with higher than guided range. Also, deposits will witness QoQ dip of 8% along with loan growth decline of 4-5 per cent. Fee income trend will be volatile and higher slippages will weigh on margins. This, coupled with one-time DTA mark-down, will lead to a loss in this quarter,” the analysts wrote in their result preview note.

Prabhudas Lilladher

Analysts at Prabhudas Lilladher estimate the bank’s NII to come in at Rs 2,307.9 crore, down 4.5 per cent YoY and 1.2 per cent QoQ. The same was Rs 2,417.6 crore in the corresponding quarter of the previous fiscal and Rs 2,280.9 crore in the June quarter of the current fiscal.

“YES Bank will continue to see challenges from consolidation in business consequently affecting operating performance leading to de-growth in NII and PPOP and higher provisioning,” they said.

The provisions are pegged at Rs 1,719 crore along with a gross non-performing asset (GNPA) ratio of 5.83 per cent. 

“Bank’s capital raising of Rs 20 billion will help to provision to some extent but higher slippages (estimated at Rs 5 billion) will deteriorate asset quality,” they noted in the result preview report.

Emkay Global Financial Services

The brokerage expects the operating profit to decline by nearly 27 per cent YoY to Rs 1,731.1 crore during the quarter under review, while the net loss is pegged at Rs 909.7 crore.

“Higher NPA/Investment provisions and DTA mark-down impact should lead to higher losses… Slippages to remain elevated including McLeod Russel, ADA-NBFC group and Cox & Kings. The bank will take mark-to-market (MTM) on DHFL bonds,” the analysts noted.

Elara Capital
 

Analysts at the brokerage estimate the bank to report a revenue of Rs 3,226.3 crore, down 17.1 per cent YoY from Rs 3,891 crore reported in Q2FY19. The same was Rs 3,553.5 crore in the June quarter of FY20.