A man walks under signage for Yes Bank Ltd. in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Yes Bank Slumps Nearly 30% After Surprise Q4 Loss

Shares of Yes Bank Ltd. slumped nearly 30 percent on Tuesday after the private lender posted an unexpected fourth-quarter loss as its new management chose to recognise stressed assets upfront and take corrective action.

The private lender’s loss stood at Rs 1,506 crore in the quarter ended March, according to its exchange filing. Analysts tracked by Bloomberg expected a profit of Rs 1,024 crore. The bank had reported a profit of Rs 1,001 crore in the previous quarter. Gross non-performing assets rose to 3.22 percent of the total advances from 2.1 percent in the previous quarter. Net NPA ratio expanded to 1.86 percent from 1.18 percent.

The weaker-than-expected earnings came in the first quarter that the bank reported under new chief executive officer Ravneet Gill, who took charge after the Reserve Bank of India denied an extension to co-founder and former CEO Rana Kapoor.

Brokerages, in their notes post earnings, highlighted that the bank is set for a period of slower growth and a lower return on assets compared to peers. The management’s intention to shift the business mix towards retail and small and medium loans will mean weaker earnings growth over the next two years, most brokerages said.

Here’s what the brokerages have to say:

Edelweiss Capital

  • Performance was a reflection of management’s shift to a conservative and prudent approach, along with a calibrated growth strategy.
  • Bank, proactively, created higher contingent provisions and pruned corporate exposure.
  • Strategy of building granularity, strengthening retail, taking calibrated risks and focus on governance, transparency and compliance is commendable.
  • However, transitioning will be arduous, entailing lower growth as well as returns.
  • Revise down FY20 and FY21 earning per share estimates by 45 percent and 40 percent respectively. Downgrades to ‘Hold’ rating.

Axis Capital

  • Growth to slow down significantly with focus on retail and SME segments.
  • Change in growth focus to impact both costs and net interest margins.
  • Low return ratios, possibility of more asset quality shocks, increasing costs and lack of capital will remain an overhang on the stock.
  • Earnings estimate for FY20 and FY21 cut by 34 percent and 30 percent respectively. Retain a ‘Sell’ rating on the stock.

BoB Capital

  • Yes Bank now expects to attain 1 percent ROA in three years, post lower long-term growth of 20-22 percent, and incur credit costs of 125 basis points in FY20.
  • Near-term headwinds from new asset quality shocks, elevated credit costs, higher operating expenses and slower growth will remain an overhang on the stock.
  • Structural changes by the new leadership geared to building a solid franchise in the long run.
  • Any rerating of the stock will hinge on effective execution of the new strategy.
  • Downgrades stock from ‘Buy’ to ‘Sell’ and cut March’20 target price from Rs 275 to Rs 210.

Motilal Oswal

  • A tough start to a fruitful journey
  • Loss due to higher provisioning on accelerated recognition of stressed assets
  • NII fell 6 percent quarter-on-quarter on moderate loan growth and net interest reversal of Rs 100 crore
  • Other income declined due to a one-time reversal of Rs 280 crore in corporate banking fees
  • Balance sheet growth likely to moderate with the bank’s strategy shifting toward building a strong retail franchise and corporate governance/transparency
  • Build in capital raise of Rs 5,000 crore at Rs 250/share
  • Cut our PAT estimate by 40 percent/32 percent for FY20/21
  • Maintains ‘Buy’ with a revised target price of Rs 280 (1.8x FY21E BV)


  • Going to be a long night before the dawn
  • Asset quality guidance may have upside risks
  • Credit cost guidance of 120 bps in FY20E also looks optimistic
  • Bank has guided for an exit RoA of 1-1.2 percent in FY22E and long-term sustainable RoA of +1.5 percent
  • Cut our FY20/21 estimates by 50-70 percent and expect RoA to be 0.4-0.7 percent
  • New MD’s strategy is good in the long run
  • Medium-term woes in terms of asset quality, management uncertainty and subdued ratios are inevitable
  • Downgrades the stock to ‘Sell’ with revised target price of Rs 155 versus Rs 260 earlier

Prabhudas Lilladher

  • New CEO’s strategy will transition bank on a new trajectory but will be very gradual.
  • Risky assets can further emanate from the balance sheet especially from real estate and infrastructure but bank is confident on the underlying collateral.
  • Significant worry comes from collapse of fee income in near term, higher credit cost.
  • Capital also is immediate area of concern with CET-I at 8.4 percent
  • Downgrade to ‘Reduce’ with target price of Rs 190 (from Rs 245)


  • Downgrades to ‘Sell’ with a target price of Rs 180 apiece.
  • Twin challenges of profitability and capital.
  • Lower return-on-equity to continue.
  • Growth will be constrained till bank raises capital.


  • Double-downgrades to ‘Underperform’.
  • Cuts EPS by 45 percent and target price by 40 percent to Rs 165 apiece.
  • Underestimated risks in structured finance.
  • Loan book clean-up, investments in retail business and pivoting of business model within corporate segment should keep return ratios subdued for long.

Morgan Stanley

  • Multiple pressure points—lower net interest margin, fees, growth; weaker asset quality and capital.
  • Expects a gradual turnaround under the new CEO.
  • Sees a 0.7-0.9 percent return-on assets in next three years.

Goldman Sachs

  • Below expectations on bad loan clean-up.
  • The fourth quarter saw kitchen-sinking, revenue re-alignment and a focus on fixing the basics of banking
  • Key focus areas for investors would be—capital raise, confidence on asset quality, improvement in cost-income ratio, quality of revenue mix and execution of strategy.

Here’s the consolidated table of the major brokerage houses on Yes Bank: