Shares in Yes Bank have crashed to their lowest levels since March 2014. In fact, as we write the shares have fallen 9 per cent to Rs 89, after dropping to a 52-week low of Rs 79.15.
Should you buy the bank shares now?
A lot would depend on the time period you are ready to hold the bank shares for. In you are an investor for 3-5 years, this could be a good stock. Remember, India's third largest private sector bank, Axis Bank was going through a similar stress some years back, just like Yes Bank is going through today. At that time, we saw some large investors pumping money in the bank, which also helped Axis Bank to see a quick and speedy recovery.
Much of the movement in the share price would depend on how soon an investor is roped in to fund capital, which would largely be growth capital. There have been reports of some interest by certain partners, but, not formal announcement in this regards has been made. It would really be a surprise, if you do not see any announcement in the next one month.
A quick resolution to stressed assets is the key
A lot of provisioning has been done for the stressed assets and if there is a quick and speedy resolution for some of these, we believe we could see a solid recovery in the share price of Yes Bank. Apart from this, the management itself is seeing gross non performing assets peaking in the 5 per cent range and going forward, there may only be an improvement.
The second quarter would be crucial for Yes Bank on account of two reasons: The first is on account of its ability to raise capital quickly and the second is on account of quick resolution to some of the stressed assets. Growth of course would be a little slower, given the stressed assets that the bank is facing.
All is not lost
On some parameters the bank continued to do well, including Current and Savings Account (CASA) growth. One of the interesting things to note is that most of the fresh slippages for the bank have come from the corporate segment of BB and below. The management in a recent interview had already guided for this.
The turnaround of course may happen, but, it is likely to take time and investors will have to be patient. As mentioned earlier, what would be crucial to watch would be the fund raising capacity of the bank and also resolution of stressed assets. Among the notable things for the bank is the solid branch network and also a good brand equity. Buying into the Yes Bank stock would need some bravery, given how volatile the shares have been.
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