Yes Bank Stock Check: Up over 40% in last one year, should you buy now? Technical and fundamental experts answer

Yes Bank, a prominent private sector lender, has drawn attention after reporting robust earnings for the quarter ending June 2024 (Q1FY25). The bank posted a net profit of ₹502.43 crore, representing a 46 percent increase from ₹342.5 crore in the same quarter the previous year.

The bank's net interest income (NII) grew by 12.2 percent year-on-year to ₹2,244 crore in Q1FY25, up from ₹2,000 crore in Q1FY24. Sequentially, NII rose by 4.2 percent quarter-on-quarter from ₹2,153 crore. Yes Bank's net interest margins (NIMs) remained largely stable at 2.4 percent for the June 2024 quarter. The gross non-performing assets (NPA) ratio stood at 1.7 percent, while net NPAs were at 0.5 percent as of June 30.

Provisions for the quarter declined significantly by 41.2 percent to ₹212 crore in Q1FY25, down from ₹360 crore in the same period last year, and decreased from ₹471 crore in Q4FY24.

In July, global rating agency Moody's upgraded its outlook on Yes Bank from ‘stable’ to ‘positive’. This upgrade reflects expectations of a gradual improvement in the bank's depositor base and lending franchise, which is anticipated to enhance core profitability over the next 12–18 months.

Moody's highlighted the improvements in Yes Bank's asset quality and capitalisation over the past 2–3 years. The bank's ability to meet the central bank's priority sector lending (PSL) rules through new lending from its branches is expected to reduce operating expenses related to meeting these targets, thus improving overall profitability.

Despite these advancements, Moody's noted that Yes Bank's profitability will remain weak compared to its Indian peers, posing a challenge to further improvements in its credit profile. The rating agency expects the bank's funding costs to remain higher than those of its peers over the next 12–18 months due to increasing competition among banks for deposits.

Stock Price Trend

The stock has shown impressive performance over the past year, increasing by approximately 43 percent and over 12 percent year-to-date in 2024, with positive returns in five out of eight months this year.

In August, the stock declined nearly 10 percent, breaking a streak of two consecutive months of gains. It had risen 12 percent in July and 3 percent in June. However, the stock saw a correction of 12 percent in May following a 12.7 percent rally in April. In March, the stock dropped over 5 percent after gaining 1.6 percent in February and 12 percent in January 2024.

Currently trading at ₹24, the stock is about 27 percent below its 52-week high of ₹32.81, achieved on February 9, 2024. It has increased approximately 70.5 percent from its 52-week low of ₹14.10, recorded on October 10, 2023.

The stock has delivered exceptional returns over the last four years, rising 101 percent since August 2020 and nearly 89 percent in the past three years. However, it has decreased by almost 74 percent over the last five years.

Despite recent volatility, market experts are keenly assessing whether its bullish trend will continue. Below, we explore technical and fundamental analysis from leading experts to provide a comprehensive outlook on Yes Bank's stock performance.

Technical View

Om Mehra, Technical Analyst, SAMCO Securities

The stock of Yes Bank has shown a mixed trend over the past couple of months, facing resistance around the 27-28 level and finding support in the ₹22-23 zone. Recently, the stock was corrected from higher levels following the formation of a double top (bearish pattern) on the daily time frame and is now consolidating. The stock remains below the 20 and 50-day moving averages, indicating a slightly weaker trend.

The daily RSI stands near the 45 level. The existing investors could hold their current positions, while fresh positions can be initiated around the 23-24 level. The stock is likely to remain sideways; however, if the level of ₹25 is breached, it could inch higher in the coming weeks. The outperformance in the banking sector could act as a catalyst for Yes Bank's potential outperformance.

Rajesh Palviya, SVP - Technical and Derivatives Research, Axis Securities

Since February 24, the stock has been consolidating within the 29 to 21 levels, reflecting short-term consolidation. This consolidation is well placed, and the stock is sustaining above its 200-day SMA at the 23 level, which is a strong support zone. On the weekly timeframe, the stock has shown a trend reversal by forming higher tops and bottoms, indicating a positive bias. Over the past couple of years, the stock has seen strong accumulation and price rise with high volumes, suggesting increased participation in the accumulation zone between 32 and11 levels. Traders and investors are advised to monitor a strong support zone of 22-20 levels for existing long positions. Any upcoming weekly close above 28 may lead to a consolidation breakout, potentially taking the stock towards the 33-35 zone.

Gaurav Bissa, VP, InCred Equities

Yes Bank witnessed a major trend reversal on the monthly charts in January this year which pushed the prices beyond 30 levels. However, it soon lost steam and since then it has been stuck in the range with 20 being a support and 30 being a strong resistance. The view for short to medium term remains muted with the expectation of prices trading in the aforementioned range for the next 2-3 months.

BP Equities

In March 2020, Yes Bank hit rock bottom before entering a prolonged consolidation phase of stage 1. This phase lasted for about 4 years, signaling increased participation and smart absorption of available supply. After doubling from the October 2023 lows, the price action transitioned into stage 2 following a brief period of accumulation. During this accumulation phase, a volatility contraction pattern emerged, indicating further absorption of available supply and smart money participation. The stock has experienced higher demand from buyers, along with improving EPS and price strength. Additionally, the RSI across daily and higher timeframes is trading above their medians without showing any divergence against the price, suggesting a solid momentum in price. Based on these observations, we recommend purchasing shares of Yes Bank with a target price of 32.30 and a protective stop at 24.10.

Fundamental View

Kotak Institutional Equities: Kotak Institutional Equities believes that the risk-reward ratio for Yes Bank shares at the current market price is "unfavorable," with a slow improvement in return on equity (RoE). It maintained a 'Sell' rating with a price target of ₹19. Kotak asserts that Yes Bank's valuation is significantly above its fair value given the current return ratios. It acknowledges the impact of lower credit costs but emphasises that a re-rating would depend on a sharp NIM expansion, which it views as unlikely in the medium term.

ICICI Securities: The brokerage has also maintained a 'Sell' rating on Yes Bank, with a target price of ₹20. ICICI Securities notes that while net interest margins (NIMs) and return on assets (RoA) are stable on a quarter-on-quarter basis, the current valuations fully reflect the bank's financial turnaround. It highlights that the current valuation at 1.5 times FY26E ABV adequately captures the turnaround and identifies a faster-than-expected ramp-up in organic PSL leading to steep RoA improvement as a key risk for the lender.

Nomura: Nomura has a neutral stance on Yes Bank, with a target price of ₹17. The brokerage finds the gradual improvement trajectory of Yes Bank's returns profile encouraging but remains cautious.

Yes Bank's stock performance has been mixed, with technical indicators suggesting potential consolidation and breakout opportunities, while fundamental analysts express caution due to valuation concerns. As the bank continues its turnaround efforts, investors should closely monitor both technical signals and fundamental developments to make informed decisions. The outlook remains varied, with potential for growth amid challenges in achieving significant profitability improvements. 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.