Analysts shrug off sharp drop in Yes Bank profit, say all is not lost

MUMBAI: Analysts weren’t surprised by Yes Bank’s June quarter earnings, even though the private lender reported a 91 per cent plunge in net profit thanks to a one-off mark-to-market provisioning of Rs 1,109 crore.

Analysts in an ETNOW poll had projected the bank to report Rs 164 crore profit for the quarter. The private lender had reported Rs 1,260 crore profit for the same quarter last year.

Total provisions came in at Rs 1,784.1 crore, up three times from Rs 625.70 crore made for the same quarter last year. March quarter provisions stood at Rs 3,661.70 crore.

Barring the one-off impact, the numbers were not bad, said analysts. Yes Bank’s pre-provisioning operating profit grew 48 per cent sequentially to Rs 1,959 crore.

“The results are looking quite okay. Fresh slippages from the corporate segment have come only from BB and below. So, that is positive. No negative surprise till now,” said Ashutosh Mishra, Head of Research at Ashika Stock Broking. He, however, awaited further clarity from the conference call

“Overall, the numbers were on the expected lines. There was a large addition of Rs 6,000 crore to slippages. That is from the existing stress book detailed in last quarter. The bank has provided limited clarity on the stress book increase or decrease,” said Pritesh Bumb, a research analyst with brokerage firm Prabhudas Lilladher.

Bumb said other income was higher than estimates,. “There are good treasury gains. That has cushioned some of the bad loan impact,” he point out. “Common equity tier-1 Capital is at 8 per cent. More clarity is needed on capital raising plans.”

While the stock may react negatively on Thursday, but there was hope from a long-term perspective.

“Earnings were below market expectations. The stock will react negatively on Thursday,” said independent analyst Ambareesh Baliga, adding that things looked better from a business growth perspective, if one looked beyond the one-off provisions.

The private lender’s advances grew 10.1 per cent YoY. Retail advances expanded 43.3 per cent YoY and 7.2 per cent sequentially to 18.3 per cent of advances from 14 per cent last year.

Retail advances growth accounted for 60.5 per cent of incremental YoY growth in advances. “From a long-term perspective, there are a few positives. We have the retail advances growing at a healthy pace. Even retail deposits have grown at a similar pace, which is decently positive. These are possibly immediate green shoots,” said Baliga.