Yes Bank tumbles as higher provisions drag Q3 profit, Bombay HC rubs salt on wound

Foreign brokerage firm Morgan Stanley has an Underweight rating on the stock with target price cut to Rs 17.5 from Rs 20 per share

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Private sector lender Yes Bank stock opened 10 percent lower on January 23 as the company’s net profit for the quarter ended December 2022 fell 80 percent on-year on the back of provisions made for loans long overdue.

Net profit for the quarter came in at Rs 52 as against Rs 266 crore in the year -ago period. Non-tax provisions at Rs 845 crore was higher by 125 percent on-year and 45 percent on-quarter.

At 9:45 am, the stock was quoting at Rs 18.10 per share, down by 8.35 percent amid high trading volumes. The stock has gained 35 percent in the past one year.

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The bank’s net interest income increased from Rs 1,764 crore in the year-ago period to Rs 1,970.6 crore in Q3 FY23, marking a 11.7 percent jump. Sequentially, the NII was largely flat, as it stood at Rs 1,991 crore in the previous quarter.

Foreign brokerage firm Morgan Stanley has an ‘Underweight’ rating on the stock with a target price cut to Rs 17.5 from Rs 20 per share. “The balance sheet improved with ARC sale/capital raise and regulations driving up-front provisions,” it noted.

The firm has cut Yes Bank’s FY23/24/25 earnings per share estimates by 37 percent/7 percent/5 percent.

In another development, the Bombay High Court has quashed Yes Bank’s March 2020 decision to write off Rs 8,415 crore of additional tier 1 (AT1) bonds but has given the lender six weeks to appeal the decision.

Also Read: MC Explains | The Yes Bank AT1 bond and why Bombay High Court refused a write-off

AT1 bonds are a type of perpetual securities that banks use to shore up their core capital to meet Basel-III norms.

Yes Bank had written off these bonds as part of the bailout in March 2020. This irked Yes Bank’s AT1 bondholders who moved the court to challenge the decision and get their money back.

“The management has indicated that the bank is in process to appeal in Supreme Court against the recent High Court order. We put the bank ‘under review’ as we seek further understanding on provisioning implications of security receipts which may impact profitability is going forward,” Nirmal Bang Institutional Equities said in a note.

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