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Underperform rating on YES Bank, target price Rs 28.80: Macquarie

In the third quarter results (3Q20), there was a massive recognition of bad loans, a huge run-down on deposits and complete erosion of core equity capital.

Last Updated: Mar 16, 2020, 03.52 PM IST
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Macquarie Research has an underperform rating on YES Bank with a price target of Rs 28.80. In the third quarter results (3Q20), there was a massive recognition of bad loans, a huge run-down on deposits and complete erosion of core equity capital. Slippages for the quarter stood at ~Rs 24.6 bn (annualized slippage ratio of ~48 per cent) while the corporate gross non performing assets (GNPA) stood at 29.3 per cent vs just 2.8 per cent in 3Q19.
YES Bank Ltd., incorporated in 2003, has a market cap of Rs 6516.46 crore.

Investment Rationale

There has been a massive run down of deposits (Rs 720 billion) till the date of implementation of moratorium. The brokerage remained worried about the further run-down of deposits once the moratorium is lifted which would put further strain on the liquidity position of the bank.

GNPA for 3Q20 stood at 18.9 per cent (Rs 407 billion) vs 7.4 per cent (Rs 171 billion) in 2Q20. This is on account of massive recognition of bad loans (~Rs 24.6 billion) done during the quarter which resulted in corporate GNPA increasing to 29.3 per cent (vs 11.1 per cent in 2Q20) while retail and MSME NPA stood at 1.5 per cent (vs 1.2 per cent in 2Q20). While determining the NPA for 3Q20, the administrator has considered slippages of ~Rs 52 billion post the period end and up to the result date which resulted in an additional provision of Rs 7.7 billion for the quarter.


The bank has reported a Gross Non Performing Assets (Gross NPAs) of Rs 40709.20 crore and Net Non Performing Assets (Net NPAs) of Rs 11114.72 crore. For the quarter ended 31-12-2019, the bank has reported Consolidated Interest Income of Rs 4745.56 crore, down 18.48 per cent from last quarter Interest Income of Rs 5821.09 crore and down 24.04 per cent from last year same quarter Interest Income of Rs 6247.84 crore. The bank has reported net profit after tax of Rs -18564.24 crore in the latest quarter.
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