Stay cautious! Brokerages sharply cut YES Bank’s target price post Q4 result

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Brokerages see up to 56% down in YES Bank after it reported a Rs 3,790 crore loss on a consolidated basis for the March quarter against a profit of Rs 2,665 crore in the year-ago period, as the asset quality reverses faced due to the Covid-19 pandemic forced the bank to set aside money for potential loan losses.

The scrip settled 4.40% down at Rs 13.91 on Monday, while the benchmark BSE Sensex closed 0.13% down at 48,718.52. Elara Capital sharply cut the target price of YES Bank to Rs 6, indicating a downside of nearly 57% from the current market price.

“Management expects recoveries to be higher than slippage in FY22E. We are building in lower YoY credit cost, however, we continue to expect pre-provision operating profit (PPOP) to be lower than provisions in FY22E / FY23E. The stock of standard stress remains high at 7% and could see accelerated slippage if the second wave persists. We are building in a loss for FY22E / FY23E. Even with the loss, we do not see the need to raise equity funds in FY22E,” Elara Capital said.

The bank, which had to be bailed out in an SBI-led rescue a year ago, narrowed its losses in FY21 to Rs 3,488 crore as against Rs 16,432 crore in FY20.

On a standalone basis, it reported a loss of Rs 3,787 crore in the March quarter as against a Rs 2,628 crore net profit in the year-ago period.

Nirmal Bang Securities retained a ‘Sell’ call on YES Bank with a price target of Rs 12. “We maintain a negative outlook on the bank given that credit cost is expected to remain elevated (highest in our coverage) and growth could remain challenging as improving the asset quality would consume most of the management’s bandwidth,” the brokerage added.