Yes Bank shares plunge 30% after Q4 shock

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Shares of Yes Bank today as much as 30% on BSE to ?166 after the private sector lender reported its highest quarterly loss at ?1,506.64 crore on the back of higher provisions, hurt by a big jump in provisions against bad loans. The bank would have reported a steeper loss if not for a tax write-back of ?832 crore in the March quarter. Yes Bank announced Q4 numbers after market hours on Friday. Total provisions during the quarter increased more than nine-fold to ?3,661.7 crore, as against ?399.64 crore in the year-ago quarter. In the December quarter, the bank set aside ?550.23 crore in provisions. At 9:40 am, Yes Bank shares had pared some losses and were down around 25% at ?178.75 on NSE.

The broader markets also struggled today with Sensex down about 150 points in early trade. Among other financials, IndusInd Bank fell 4% while Indiabulls Housing Finance declined 5% in early trade.

Yes Bank’s other income, which includes core fee income, dropped 62.58% to ?531.69 crore from ?1,420.97 crore in the year-ago quarter.

Net interest income (NII)—the difference between interest earned on loans and paid on deposits—increased 16.33% from ?2,154.24 crore in the March quarter of 2018 to ?2,505.93 crore in March quarter 2019. Its net interest margin (NIM)—a key measure of profitability—fell 30 basis points (bps) on a year-on-year basis and 20 bps, sequentially.

In a filing to the stock exchanges, it said gross slippages in the fourth quarter stood at ?3,481 crore, of which ?552 crore was on account of an airline, and ?529 crore on account of a stressed infrastructure conglomerate.

Australian brokerage Macquarie has admitted to overlooking the risks from the structured finance business of Yes Bank and has downgraded the stock by a full two notches. The brokerage also flagged concerns on the fee income and the retail franchise of the fifth largest private sector lender.

“We must eat the humble pie today and admit we underestimated the risks in structured finance. We got the call wrong,” Macquarie said in a note Monday, adding over the past eight years, it felt the bank can thrive in a risky business like structured finance.

The brokerage also announced a double-downgrade of the Yes Bank stock to ‘underperform’ and slashed the stock price a low ?165 over the next 12 months, as against Friday’s close of ?237.40.

The Yes Bank management has guided towards a watchlist of ?10,000 crore, a 20-25% loan growth led by retail and small businesses apart from a 50% decline in corporate fee in the next three years, the brokerage explained for its view on its once-top pick stock.

Domestic brokerage Prabhudas Lilladher has downgraded Yes Bank stock to “reduce” with a target price of ?190.

“Significant worry comes from collapse of fee income in near term, higher credit cost if more risks arise from unidentified stress and risks of NIMs going down on higher interest reversals if stress book falls into NPA, leading to an infinite loop of lower return ratios in medium term,” the brokerage said.

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