Shares of YES Bank dropped about 5 per cent to Rs 15.48 at the early trading hours but the stock recovered to Rs 15.99 around 10 am on Monday. YES Bank on Saturday reported its earnings for the period that ended on March 31, 2023, and its performance largely can be said to be a mixed bag for analysts. The private lender's quarterly earnings missed the street's estimates on the back of higher provisioning but improved asset quality was positive. Shares of YES Bank dropped about 5 per cent to Rs 15.48 during the early trading hours. However, the stock recovered to Rs 15.99 around 10 am on Monday, commanding a market capitalisation (m-cap) of around Rs 46,000 crore. The scrip had settled at Rs 16.22 on Friday. YES Bank's Q4 numbers were full of some hits and misses on the analyst's expectations leading to a 5 per cent blip in the stock before it staged a smart recovery as the session progressed. Here's what are key hits and misses from the YES Bank's earnings in the March 2023 quarter:Hits: On a quarter-on-quarter (QoQ) comparison, net profit was almost three times higher from Rs 51.52 crore in Q3FY23, owing to a low base in the prior period. However, analysts had expected a better performance on a sequential basis.
Misses: YES Bank reported a 45 per cent drop in net profit on a year-on-year (YoY) basis for the Q4FY23 as provisions for bad loans increased. Net profit dropped to Rs 202.43 crore for the reporting quarter from Rs 367.46 crore in the same period a year earlier. Provisions and contingencies increased to Rs 618 crore from Rs 271 crore in the year-ago period and the lender’s asset quality was mixed. The gross non-performing asset (NPA) ratio rose to 2.17 per cent from 2.02 per cent in the December quarter. However, the gross NPA ratio was down from 13.93 per cent on YoY comparison. In December 2022, Yes Bank completed the transfer of bad loans worth Rs 48,000 crore ($5.9 billion) to private equity firm JC Flowers in a deal aimed at cleaning up its balance sheet. However, the net NPA ratio was at 0.83 per cent, down from 1.03 per cent in the prior three months.Neutrals: YES Bank’s net interest income (NIIs) rose 15.7 per cent to Rs 21,050 crore, while the net interest margin was seen at 2.80 per cent. Both the numbers were on the expected lines. The private lender’s net advances grew by 12.3 per cent in a year, led by retail loans, while deposits rose 10.3 per cent. Analysts take: YES Bank is not under the coverage of many brokerage firms. Those, who are tracking the stocks, remain neutral on the counter with a negative bias. They believe that normalization for the troubled lender would take some more time and valuations are also very cheap. Asset quality stress is negligible after the NPL sell-down in the previous quarter. Normalization of return ratios is still a few years away and the high-cost structure of the business would need a combination of growth ramp-up, improvement in revenue profile, or reduction in costs, said Kotak Institutional Equities. The bank has a comfortable capital position today but is operating in a market with a broadly similar lending philosophy and a weaker liability profile. Valuations are not inexpensive to change our view, it maintained its 'reduce' rating with a fair value target of Rs 16. "We would continue to evaluate the bank based on the choices it is likely to make to improve the return ratios," it said.