YES Bank declines 5% ahead of Q4 results today; here's what analysts expect

Topics Buzzing stocks | YES Bank | Markets

The management's commentary on business growth amid the Covid-19 crisis, and its roadmap to raise funds would be tracked by investors.
Shares of YES Bank tanked 5.2 per cent to Rs 25.2 on the BSE on Wednesday ahead of its March quarter results, slated to be released later today. Analysts expect the private lender to widen its loss on a yearly basis in Q4FY20 amid weak loan growth and narrowing margins.

At 9:33 am, the private lender was trading 3.6 per cent lower at Rs 25.65 apiece. In comparison, the benchmark S&P BSE Sensex was at 31,174.50 level, down 279.01 points or 0.89 per cent. A combined 5.33 million shares have changed hands on the counter on the NSE and BSE till the time of writing of this report. The bank's share price has surged 379.27 per cent from its 52-week low of Rs 5.55 hit on March 6, 2020.

This would be the first quarterly result after eight private financial institutions picked up stake in the lender under the Reserve Bank of India-initiated restructuring scheme.

During the quarter under review, State Bank of India (SBI) had put in Rs 6,050 crore, HDFC and ICICI Bank Rs 1,000 crore each, Axis Bank Rs 600 crore, Kotak Mahindra Bank Rs 500 crore, Bandhan Bank and Federal Bank Rs 300 crore each, and IDFC First Bank Rs 250 crore in the bank as a part of its restructuring scheme.

However, within two weeks of investment, Kotak Mahindra Bank sold 9.5 per cent of its stake in YES Bank, IDFC First bank sold 16.1 per cent stake and Federal Bank sold 19.6 per cent of its holding between March 17 and March 31, 2020, shareholding pattern shows. On the other hand, ICICI Bank has increased its holding by about 2 lakh shares as of March 31, 2020.

Under the scheme, the investments made at Rs 10 per share, came with the condition that at least 26 per cent of SBI’s stake would be locked-in for 3 years. The other seven investors are also required to comply with a three-year lock-in for at least 75 per cent of their investment amount. 

What to expect from Q4 numbers

Analysts at Kotak Securities expect the private lender's net loss to widen at Rs 4,404.4 crore in the quarter under review on a YoY basis. The bank had incurred a net loss of Rs 1,506.6 crore in the March quarter of the previous fiscal (Q4FY19) and Rs 18,559.6 crore in the December quarter of the current fiscal (Q3FY20). 

Those at BoB Capital, however, expect the loss to come in at Rs 5,245.2 crore.

Kotak Securities pegs the pre-tax loss, or loss before tax (LBT), at Rs 6,902.9 crore, up from Rs 2,338.3 crore logged in the corresponding quarter of FY19. The same was Rs 24,771.4 crore in Q3FY20. 

"We expect outstanding loans to decline nearly 40 per cent YoY and similar trend on deposits. There is likely to be an increase in pressure on net interest margin (NIM). Revenue pressure will be high also due to weak fee income (sharp decline)," they wrote in their results preview note.

On average, net interest income (NII) is seen declining 60 to 64 per cent YoY, to come between Rs 893.2 crore and Rs 1,006.7 crore in the recently concluded quarter. 

In the March quarter of the previous fiscal, NII stood at Rs 2,505.9 crore, while the same was Rs 1,065.5 crore in Q3FY20.

Key monitrables

Analysts would keenly watch out for the bank's asset quality and non-performing asset (NPA) ratios. That apart, the management's commentary on business growth amid the Covid-19 crisis, and its roadmap to raise funds would be tracked by investors. 

In Q3FY20, gross NPAs stood at Rs 40,709.20 crore, or 18.87 percent of the bank’s total loan book, while the net NPA was Rs 11,114 crore, or 5.97 percent of net advances. Provisions in the previous quarter of the current fiscal were Rs 24,765.73 crore. 

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