Why Yes Bank Share Price is Falling

Once again, many readers have started to ask what we think about Yes Bank as the stock is currently going through a rough patch.

With no trigger points and no major developments for the past couple of months, the stock has lost the charm it once had. It's currently languishing at the same levels it was trading at a year ago.

In 2020, we saw what was arguably, the largest bail out of a bank in Indian banking history by a State Bank of India (SBI)-led consortium. At the time, Yes bank was the fifth largest private bank in the country. The swift bail out of Yes Bank helped avoid a crisis in the financial system.

Since then, the bank has reported a turnaround and significant progress as it exited the reconstruction scheme of 2020. It raised funds and did what not. Despite all this, Yes Bank shares continue to underperform and trade at 52-week lows.

Let's find out why Yes Bank share price is falling and what lies ahead for the private lender.

Q2 Results Miss Estimates

The recent fall in Yes Bank shares could be attributed to the private lender failing to meet street estimates in its Q2 earnings for financial year 2024.

Yes Bank reported a 50% year-on-year (YoY) growth in its net profit, led by 15 YoY decline in provisions. Net profit came in at Rs 2.3 bn as against an estimated Rs 3.3 bn by industry experts.

Operating profit was flat. The bank's revenue grew 8%, led by non-interest income (higher retail fees), while net interest income (NII) declined 3% YoY.

As of 30 September 2023, Yes Bank's asset quality remained stable, with gross non-performing asset ratio at 2%, flat from the previous quarter. Net NPA ratio was also flat at 0.95% compared to 1% in the June 2023 quarter.

The management expects the gross NPA ratio to remain unchanged and the net NPA ratio to fall to 0.75% in FY24.

Underperformance of Nifty Bank

In recent months, the Nifty Bank index has underperformed benchmark as well as broader indices.

This is because two of the largest stocks in the index with the maximum weightage - HDFC Bank and Kotak Bank - have also underperformed.

So the other reason why Yes Bank shares are finding no takers is because even its fundamentally strong counterparts have found it tough in the volatile market environment. The cost of borrowing is near two-decade highs in the global market.

In FY23, Yes Bank's profits remained moderate with improvement in net interest margin (NIM) being offset by higher operating expense led by higher business and IT costs on account of retailisation, and higher credit costs.

Going forward however, banking stocks could fare well as analysts have turned bullish on the Indian banking story. A few more interest rate hikes are likely on the cards.

What Next?

Yes Bank did stage a sharp turnaround when equity was infused by domestic banks and financial institutions aggregating to Rs 100 bn as part of restructuring scheme. In July 2020, the bank also raised equity capital of Rs 150 bn through a follow-on public offer (FPO).

In its latest concall, Yes Bank said that its recovery track record has remained strong. It's expecting big-ticket resolutions in the coming year which could contribute to profitability.

The bank has made senior hiring in the wholesale banking segment to drive growth in large corporate business. It's also investing in digital capabilities and has made strides in its digital banking segment by launching Iris by YES Bank and enabling UPI payments and interoperability.

Yes Bank also has a profit making subsidiary - Yes Securities. The private lender recently acquired 18 million shares in Yes Securities at Rs 55.75 by infusing more capital to the tune of Rs 1 bn.

Overall, the market is divided over the near-term future of Yes Bank. The turnaround has no doubt been remarkable. Full credit for that goes to the management team. But the work is far from done.

The bank has to grow aggressively and yet ensure the quality of its assets does not get diluted.

How Yes Bank Share Price has Performed Recently

In the past five days, the stock is down 7%. On a YTD basis, Yes Bank is down 26%.

Yes Bank has a 52-week high of Rs 24.8 touched on 14 December 2022 and a 52-week low of Rs 14.1 touched on 23 October 2023.

About Yes Bank

Yes Bank is a full-service commercial bank that offers banking solutions to retail, corporate, and small and medium-sized businesses (SMEs).

Yes Securities, the bank's wholly owned subsidiary, conducts investment banking and brokerage business. It offers a comprehensive banking experience through an extensive branch banking network of over 1,000 branches and 1,800 ATMs.

The past history of Yes Bank may not paint a good picture, but things are changing. It remains to be seen whether Yes Bank regains its glory once again, like how it performed in 2018.

To know more about the company, check out Yes Bank's financial factsheet and its quarterly results on our website.

You can also compare Yes Bank with its peers:

Yes Bank vs Federal Bank

Yes Bank vs Bank of Baroda

Yes Bank vs ICICI Bank

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...