The private lender Yes bank stock plunged 10% on January 23 due to provisions for past-due loans, which caused the company’s net profit for the quarter ending in December 2022 to decline by 80% year over year.
Compared to the same quarter a year ago, the net profit for the quarter was Rs 52 instead of Rs 266 crore. Non-tax provisions increased by 125 percent year over year and by 45 percent quarter over quarter to Rs 845 crore.
Amid brisk trade volume, the stock was quoted at Rs 18.10 per share, down 8.35 percent. Within the last calendar year, the stock has increased by 35%. Net interest revenue for the bank climbed by 11.7 percent, from Rs 1,764 crore in Q3 FY22 to Rs 1,970.6 crore in Q3 FY23. Sequentially, the NII was practically unchanged from the previous quarter, when it stood at Rs 1,991 crore.
The stock has an “Underweight” rating from international brokerage firm Morgan Stanley, with a target price reduction to Rs 17.5 from Rs 20 per share. It was stated that the ARC sale/capital raise and laws forcing up-front provisions strengthened the balance sheet. Estimates for earnings per share for FY23, FY24, and FY25 have been lowered by 37%, 7%, and 5%, respectively.
Another development involves the Bombay High Court’s decision to overturn Yes Bank’s March 2020 decision to write off Rs 8,415 crore of extra tier 1 (AT1) bonds. The lender has six weeks to challenge the ruling, though. Banks employ AT1 adhesives, a class of perpetual securities, to increase their core capital to comply with Basel-III standards.
“The management has stated that the bank is planning to challenge the latest High Court ruling to the Supreme Court. According to a letter from Nirmal Bang Institutional Equities, we placed the bank “under review” as we look for more information on the provisioning implications of security receipts that could affect profitability moving ahead.