Analysts have downgraded the shares of YES Bank following the announcement of its March quarter results, where it reported a net loss of Rs 1,506 crore. Analysts have cut their 12-month price target by as much as 40 per cent and scaled back their earnings growth forecasts by up to 45 per cent for FY20 and also FY21. Large stressed pool, aggressive accounting practices and weakness in the retail franchise are among the reasons cited by analysts for their bearish stance.
“We and the Street both underestimated risks in structured finance. We cut EPS (earnings per share) by 45 per cent and target price by 40 per cent to Rs 165,” says Macquarie in a note “double-downgrading” the stock. “Loan book clean-up, investments in retail business and pivoting of the business model within the corporate segment should keep return ratios subdued for long.”
“As YES shifts from its historic focus on structured credit, there are multiple pressures — lower NIMs (net interest margins), fees growth, weaker asset quality and capital. We expect gradual turnaround under the new CEO,” says a note by Morgan Stanley, which has cut the price target for the stock from Rs 160 to Rs 125. The stock ended at Rs 238 on Friday and experts say it could drop below Rs 200 when trading resumes on Tuesday.