YES Bank plummets 13% as Q4 net loss widens to Rs 3,788 crore

Yes Bank shares slipped over 13 per cent in Monday's session after the private sector lender reported widening of losses during the quarter ended March 2021.

The private sector lender's standalone net loss widened marginally to Rs 3,788 crore in the March quarter of FY21 as against a net loss of Rs 3,668 crore a year ago. The lender posted a net profit of Rs 148 crore in the December quarter.

Following this development, the scrip hit an intra-day low of Rs 12.60 on the BSE. Later, it recouped some losses and was trading 4.26 per cent down at Rs 13.93 around 9.45 am. At the same time, the S&P BSE Sensex was down 0.69 per cent.

During the quarter, the total income of the bank declined to Rs 4,805.30 crore from Rs 5,818.59 crore in the same period a year ago. 

Meanwhile, the provisions (other than tax expense) and contingencies rose 7.5 per cent year-on-year (YoY) to Rs 5,239.59 crore as compared to Rs 4,872.34 crore in the same quarter last year.

On the asset front, the bank's gross non-performing assets (NPAs) as of March 31, 2021, stood at 15.41 per cent of the gross advances, slightly down from 16.80 per cent in the year-ago period. However, net NPAs rose to 5.88 per cent from 5.03 per cent a year ago.

Post the results, brokerages held mixed views on the stock. 

"Given the inherent weak quality of the loan book from the previous regime, we think that the collective pool of restructured assets and SMA accounts could act as a significant source of further slippages in FY22. Accordingly, we have increased our credit cost estimates and expect the bank to report a net loss of Rs 8.5 billion in FY22," said Raghav Garg and Arun Bagga, research analysts at Nirmal Bang Institutional Equities.

Amid the current pandemic situation, significant amounts of recoveries and resolutions could remain a challenge, they added. 

"In this backdrop, we think write-offs would continue to remain a preferred strategy to reduce absolute stress.  We maintain a negative outlook on the bank given that credit cost is expected to remain elevated (highest in our coverage) and growth could remain challenging as improving the asset quality would consume most of the management’s bandwidth," the brokerage added in an earnings review note. 

Nirmal Bang has a SELL rating on the stock with a target price of Rs 12, based on 0.9x FY23E ABV.

Meanwhile, analysts at ICICI Securities advise holding the stock and have a target price of Rs 16.

"Improved recovery momentum and controlled incremental slippages can help manage credit cost sub-3 per cent in FY22/FY23E. The bank’s priority for rebuilding the trust in the franchise, focus on granular advance growth (led by retail, SME and working capital financing) and improving CASA ratio was reflected in Q4FY21 as well," they said. 

Covid resurgence causing further stress, lock-in of shares and lower float boosting value beyond fundamentals are some of the key risks, according to the brokerage.