YES Bank extends gain after reporting net profit of Rs 129 crore in Q2

Shares of YES Bank rose 5 per cent at Rs 14.01 on the BSE on Monday, extending its Friday’s 5 per cent gain, after the lender returned to profit in the quarter ended September (Q2FY21).

However, the stock erased its early morning rally and was up 1.4 per cent higher at Rs 13.54 on the BSE at 09:30 am. In comparison, the S&P BSE Sensex was down 0.26 per cent at 40,579 points. A combined around 89 million equity shares had changed hands on the counter on the NSE and BSE.

Private sector lender YES Bank’s net profit rose sequentially to Rs 129 crore in Q2FY21 from Rs 45 crore in the first quarter ended June 30 (Q1FY21). The bank had posted a loss of Rs 600 crore in Q2 of the previous financial year (Q2FY20).

Net interest income (NII) rose 3.4 per cent sequentially to Rs 1,973 crore in Q2 from Rs 1,908 crore in the previous quarter. On year-on-year (YoY) basis, NII was down by 9.7 per cent from the base of Rs 2,186 crore in the second quarter of the previous year. Net interest margin (NIM) rose marginally to 3.1 per cent in Q2 from 3 per cent in the June quarter. NIM was at 2.7 per cent in Q2 of the previous year.

Its asset quality improved marginally as gross non-performing assets (GNPAs) stood at 16.9 per cent in Q2 from 17.3 per cent in Q1. Net NPAs have also come down 25 bps to 4.71 per cent.

Non-interest income was up 13.9 per cent to Rs 707 crore in Q2 from Rs 621 crore in Q1, due to the strong bounce back across transactional and granular fee streams, aided by pick-up in economic activity and improved credit ratings.

YES Bank’s Q2FY21 financial performance improved sequentially on the back of expansion in, better traction in non-interest revenue and opex control. Given the Supreme Court ruling halting recognition of NPAs, GNPAs (in absolute value terms) were largely unchanged at Rs 323.4bn, forming 16.9 per cent of the total advances. The outlook on asset quality remains dim as the bank has maintained its slippage guidance of 7-8 per cent for FY21.

“However, what still remains a concern is that the underlying pitch (to garner deposits) remains SBI-oriented rather than something that would seem more self-sustainable. And for this reason, it becomes difficult to assess the true standalone strength of the deposit franchise. In light of the expected near-term slippages, elevated NPAs and a very average revenue profile, we are not entirely convinced of the RoA guidance put out by the management,” analysts at Nirmal Bang Equities.

With more than 50 per cent of the shares under a lock-in for 3 years, whether the market price reflects the true value can be debated, the brokerage firm said.