YES Bank extends fall; stock down 11% in two days

The stock was down 5% to Rs 196 on Tuesday, falling 11% in past days from Friday's closing level of Rs 220 on the BSE.

Shares of YES Bank were trading 5 per cent lower at Rs 196 on Tuesday, falling 11 per cent from Friday’s closing level of Rs 220 on the BSE.

The stock has erased its almost entire 12 per cent gain recorded in two days after the private sector lender on Thursday, January 24, 2019 said that it has received the Reserve Bank of India (RBI) approval to select Ravneet Singh Gill as its new managing director and chief executive officer (MD & CEO). He is set to join on or before March 1, 2019.

“The announcement of Ravneet Singh Gill being appointed as new MD & CEO addresses uncertainty related to the top management. The change in leadership warrants a balance sheet clean-up and impact on earnings in near term. Therefore, we conservatively factor in higher credit cost in FY20E”, analysts at ICICI Securities had said in result update note.

On the asset side, large corporates (sales over Rs 1,000 crore) comprise around 67 per cent while mid-corporate; SME/retail combined is 33%. Asset quality has remained resilient in the past but slippages of large stress account and divergence as per RBI supervision led to volatility in NPA numbers. Anticipating slippage of remaining IL&FS exposure and balance sheet clean up by new management, we factor increase in GNPA ratio to around 4.6 per cent in FY20E. Accordingly, credit cost is seen to remain elevated in near term, the brokerage firm added with ‘buy’ rating on the stock with 12 target price of Rs 300 per share.

Analysts at JP Morgan rated YES Bank Neutral, as the brokerage firm see valuation as range-bound until issues surrounding leadership and equity-raising are resolved.

YES Bank’s loan growth should moderate in FY20 as the base effect builds. Further, given the unusual set of circumstances around the CEO’s (Mr. Rana Kapur) departure, the market may question the sustainability of credit costs and NPLs. RBI’s divergence report and a smooth leadership transition could help address that, the brokerage firm said in December quarter results update.

At 02:27 PM; YES Bank was trading 4.4 per cent lower at Rs 198 on the BSE, as compared to 0.49 per cent decline in the S&P BSE Sensex. The stock was the top loser among S&P BSE Sensex index. A combined 64 million equity shares changed hands on the counter on the BSE and NSE.