Yes Bank net profit rises 25.1% in Q2

Yes Bank net profit rises 25.1% in Q2”

Shares of Yes Bank slumped 9.8 percent to Rs 299.0 on the Bombay Stock Exchange (BSE). On Thursday, the stock had closed at Rs 331.70. So far this year, it has gained 33%.

This 3.9 per cent of the loan book is double that of the watchlist which narrowed down to Rs 6,000 crore as of September from the Rs 22,000 crore on March 2016. If anything, it highlights that the underwriting of the bank is significantly different from other banks.

Rana Kapoor, managing director and chief executive officer, YES Bank, told analysts in the concall, "Over the past two quarters, the amount of loans picked by the regulator have either been repaid and recognised by the bank". We probably find such business models hard to value at higher multiples even if the reported RoEs (return on equities) are closer to 20%.

"Both these trends (i.e., the watch list including only half of the accounts identified by RBI and continuing material downgrades below investment-grade) indicate that the bank has not been prudent in identifying the extent of its asset-quality issues", the report said.

Yes Bank declared its quarterly results today wherein its Q2FY18 net profit rose ~25% yoy to ~Rs 1,003 Cr; overall, the result was in-line with estimates. As a percentage of total loans, gross NPAs to 1.82% as the end of September compared to 0.97% three months earlier. It expects net profit to drop to Rs 2,550 crore, compared with Rs 3,100 crore in Q2FY17 due to one-off life insurance stake sale a year ago.

BNP Paribas maintained a hold rating on Yes Bank and maintains a target price of Rs 285. IDFC Bank was downgraded to "underperform" from "neutral" and lowered its target price to Rs270 a share from Rs309 a share.

Higher under-reporting also forced the bank to hike its provisions to Rs 443 crore during the quarter, much higher than the Rs 250 crore of provisioning it normally does during a quarter.

Yes Bank said the net impact of the retrospective slippages has been reflected in the results for the quarter ended September 30.

Of the 52 brokers tracking Yes Bank stocks on Bloomberg, as many as 39 recommended a "buy" rating, nine asked its investors to "sell" the stock and four have a "hold" rating.

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