Yes Bank shares tank 11% on reporting 80% fall in Q3 profit

Shares of Yes Bank plunged more than 11% to ₹17 apiece on the BSE in Monday's early deals after the lender reported a 80% fall its in quarterly net profit for the three-month period ended December 2022 as overall provisions of rose to ₹845 crore during the quarter under review as compared to ₹375 crore year-on-year (YoY).

Net profit fell to ₹51.5 crore as compared to ₹266 crore in the year ago quarter. Meanwhile, the net interest income (NII), difference between interest earned and expended, rose nearly 12% to ₹1,971 crore. The net interest margin (NIM), which is a key indicator of a bank's profitability, rose 10 basis points (bps) to 2.5%.

The bank's asset quality improved as gross non-performing assets (NPAs) declined to 2.02% of total loans, from 12.89% in the previous quarter whereas the net NPAs stood at 1.03% as compared to 3.60% quarter-on-quarter (QoQ). 

“Yes Bank earnings in Q3FY23 were weighed down by higher than anticipated provision related to ageing of stressed assets.. Nonetheless, we remain cognisant of the risks arising from the delay in resolution of stressed pool, incremental ageing-related provisions, modest RoE profile during transition, decision to write-down AT-1 bonds being challenged in Court and stock supply overhang post the expiry of lock-in shares in March 2023. Maintain HOLD with a revised target price of ₹19.3 (earlier ₹15.7),” said brokerage ICICI Securities in a note.

The brokerage house sees a gradual turnaround in the relevant operating metrics driven by the granular retail assets as well as liabilities and improved confidence in stability of the franchise. “Post the stressed pool sale, adjusted book value (adjusted for net NPAs) has been favourably impacted to the extent of 8-10% despite lower earnings build-up for FY23E,” the note added.

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