YES Bank shares rise ahead of Q4 results; here's what Kotak, other brokerages expect

YES Bank shares rise ahead of Q4 results; here’s what Kotak, other brokerages expect

Shares of YES Bank Ltd climbed during the trading session on Friday ahead of its earnings. The private sector lender is scheduled to announce its results for the quarter and financial year that ended on March 31, 2024 on Saturday, April 27.

Brokerage firms, tracking the lender, said that YES Bank may report a muted performance in terms of net interest income (NII) and net interest margin (NIMs) both on quarter-on-quarter (QoQ) and year-on-year (YoY) basis. The lender’s asset quality also may remain under pressure, while pre-provisioning operating profit (PPOP) may also fall on rising cost of funds.

Analysts believe that the roadmap for the normalcy in the coming future, guidance and outlook on asset quality and cost of funds and return of assets shall be the key things to watch out after Q4 numbers.

Kotak Institutional Equities sees YES Bank’s NII at Rs 2,105.3 crore, up 3.8 per cent QoQ but down 0.6 per cnet QoQ. PPOP may come in at Rs 888.9 crore, up 11.8 per cent QoQ and 8.7 per cent YoY. The lender may report a net profit of Rs 202.4 crore, up 30.4 per cent YoY and 14 per cent QoQ.

“We expect flat to decline in NII as the industry average loan growth will be offset by rising cost of funds. We would need to see the progress in the retail portfolio, especially unsecured loans where the bank has turned cautious. Deposit growth of 22 per cent yoy is ahead of loan growth and exceptionally strong,” said Kotak. It pegs in NIM of 2.7 per cent but there is likely to be a lot of volatility, it said.

“We should see healthy traction on recovery and upgrades this quarter. We are building in slippages of Rs 1,200 crore. The earnings impact is difficult to forecast, given the nature of provisioning policy,” said Kotak. The focus is shifting to rebuilding the business. Conversations would be on growth and return to normalized levels of business operations, it added further.

YES Bank shares rose about 1.89 per cent to Rs 26.44, during the trading session on Friday, commanding a total market capitalization of around Rs 76,000 crore. The stock had settled at Rs 25.96 in the previous trading session on Thursday. The stock has gained about 17 per cent in the year 2024 so far.

Nuvama Institutional Equities said that YES Bank NIMs may decline 15 bps leading to a 2 per cent fall in NII. Core PPOP may take a hit of 13 per cent in the quarter. “Higher CoF will lead to lower NIM and NII,” said Nuvama in its report.

On a reported balance sheet basis, loan growth stood at 12 per cent YoY and deposit growth was strong at 22.5 per cent YoY led by robust growth of 23 per cent YoY in CASA deposits. As a result, the CASA ratio improved to 30.9 per cent, said Nomura. Credit-to-deposit ratio moderated to 86 per cent and liquidity coverage ratio (LCR) stood at 116 per cent, it said.

“We expect Yes Bank to deliver RoA of 0.5 per cent and 0.8 per cent and RoE of 4.5 per cent and 7.5 per cent in FY25F and FY26F, respectively,” Nomuda sadded. “Yes Bank’s return profile, though on an improving trajectory, is significantly lower than peers’. Further, Yes Bank trades at 1.6 times 1-year-forward. BVPS adequately captures the positives,” it added with a ‘neutral’ view.

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