"We hazard a guess, but in our opinion, the reappointment may not be a clean one, and while all the options are possible, the Street is likely to react negatively to this uncertainty. There are three impending catalysts viz. finalisation of Rana Kapoor's reappointment with whatever associated clauses; non-performing loan (NPL) divergence report for FY18; and capital issuance," write Nilanjan Karfa and Harshit Toshniwal of Jefferies.
They, however, have maintained a buy rating on the stock for now with a price target of Rs 445, implying an upside of nearly 32 per cent from Friday's level.
Thus far in calendar year 2018 (CY18), YES Bank has performed in line with the markets
and gained around 9 per cent, as compared to 10 per cent rise in the Nifty Bank index and 11 up move in the Nifty50 index.
Analysts at Macquarie suggest that anything short of a full three-year term for Kapoor will be taken negatively by investors. In the absence of any communication from the bank, they say the markets
will now begin to speculate as to what matter the RBI is investigating. They, too, maintain an outperformer rating on the stock with a target price of Rs 425.
“In the low probability event that RBI asks Rana Kapoor to step down, it would be a significant negative for the stock. Despite how institutionalised Yes Bank has become in processes and management strength, the market sometimes does not differentiate between the founder-CEO and the bank. Planned $1 billion qualified institutional placement (QIP) at the end of the year (and thereby future growth) would also go into limbo,” wrote Suresh Ganapathy, Nishant Shah and Akash Nainani of Macquarie in a note.
For the April – June 2018 quarter (Q1FY19), YES Bank reported a 31 per cent rise in its net profit at Rs 12.6 billion. While the net interest income (NII) grew 22 per cent on a year-on-year basis to Rs 22.19 billion, its asset quality took a hit.
The gross non-performing assets (NPAs), as a percentage of total advances, in the recently concluded quarter, stood at 1.31 per cent, up by 34 basis points (bps) compared to the previous corresponding period and 3 bps from the previous March quarter.