The Yes Bank shares tumbled as much as 20% after after the Indian lenders profit missed estimates, bad-loan provisions swelled and capital buffers weakened.
While the Mumbai-based lender returned to profit in the three months ended June, its provisions for soured debts almost tripled from a year earlier, results showed late Wednesday. Yes Bank will need to issue fresh capital to give it room to boost revenue and profitability, a Bloomberg Intelligence analyst said.
The results turned out to be far worse than what we had anticipated, Jefferies analysts led by Nilanjan Karfa wrote in note, cutting their share price target for Yes Bank to ₹50 from ₹80 . Capital infusion is of utmost urgency.
Yes Bank is grappling with a crisis among NBFCs because of its sizeable exposure to the cash-strapped industry. The issue has complicated new Chief Executive Officer Ravneet Gills efforts to clean up the balance sheet after the lender clashed with the Reserve Bank of India last year for not adequately disclosing problem loans.
Read more: YES Bank - Higher slippages, slowdown in loan growth weigh on performance
The shares slid 11% at early trade in Mumbai, taking this years decline to 52%. The stock is the worst performer on Sensex index this year.
It has registered a net income was ₹114 crore ($16.6 million) in the three months ended June 30 compared with a loss of ₹1,507 crore in the March quarter and profit of ₹1,260 crore a year earlier.
Yes Bank set aside ₹1,780 crore as provisions in the quarter. They included a one-time impact of ₹1,100 crore for losses in investments due to rating downgrades at companies belonging to two financial services groups, the bank said, without identifying them. The provisions rose from ₹626 crore a year earlier but were smaller than ₹3,660 crore three months ago.
Other key figures:
* Gross bad loans as a percentage of total lending widened to 5.01% from 3.22% in the previous quarter
* Capital adequacy ratio was at 15.7% from 17.3% a year earlier and 16.5% in the March quarter; core equity
* Tier 1 capital was 8% versus 8.4% three months earlier
The decline in the core capital ratio is worrisome, said Jaikishan Parmar, an analyst at Angel Broking. It means that they wont be able to grow if they cannot raise capital.