YES Bank extends recovery; stock rises 21% in two sessions

Shares of YES Bank have risen for the second consecutive day, gaining over 10 per cent to Rs 223 levels on the National Stock Exchange (NSE) in intraday trade today, after the private bank said that it is fully prepared for the succession plan for its managing director and chief executive officer and will finalise two external experts for the search committee by October 7.

The stock has risen over 21 per cent in the past two sessions after it hit a 28-month low last week.

"Search & Selection Committee, assisted by a Global Leadership Advisory Firm, will evaluate both internal and external candidates and make suitable recommendations to the Board of Directors for onward submission to RBI.," the bank said in a regulatory filing on Monday.

YES Bank on Monday also released its unaudited financial results for the quarter to September. The bank registered a 41 per cent year-on-year rise in deposits at Rs 2.23 lakh crore in the second quarter (Q2FY19) while the CASA ratio grew 28.2 per cent YoY. 

Gross non-performing assets stood at 1.35 per cent of gross advances compared with 1.82 per cent in the same quarter last year.

Analysts have given a thumbs-up to the development, with most recommending a 'buy' rating on the stock.

"While the appointment of the new CEO will take its due time, the process has started and the bank board seems to be working with January 2019 timelines. On asset quality, while the divergence report is awaited, management is confident of its credit cost guidance; an improving corporate cycle also gives us some comfort," said analysts at Deutsche Bank in a recent report while maintaining a 'buy' rating on the stock with a 12-month price target of Rs 310.

Given the recent events at the bank, analysts at Investec Securities suggest the market will going to ignore facts and numbers and focus more on news flow and sentiments in the near-term. 

"We believe risk-reward is extremely favourable and hence recommend buying YES Bank at the current valuations. YES Bank’s share price has dropped over 55 per cent since the RBI refused to extend Mr Rana Kapoor’s tenure to beyond Jan’19. At the current levels, YES is trading at 1.5x trailing P/B which is the bottom, last seen during the FY14-15 period. Maintain buy rating with a price target of Rs 430," they said in a recent note.