Yes Bank Back On Track, Should You Buy The Stock?

Yes Bank has released its numbers for the quarter ending Sept 30, 2020 and the numbers indicate that the bank is on track to recovery. Let's dwell a little deeper into some of the key indicators and see what to make of it.

Retail depositors show confidence in the bank

Deposit mobilized for the quarter ending Sept 30, 2020 was Rs 1,35,815 crores, which grew 15.7% quarter on quarter and 28.9% over a 6 month period.

This shows that deposit holders particularly retail depositors continued to show faith in the bank. In fact, when the bank ran into trouble many depositors were withdrawing their money. There now seems to be a renewed confidence in what the bank is doing, after State Bank of India taking a stake in Yes Bank.

In fact, the CASA Accounts opened during the quarter ending Sept 2020, were greater than pre-COVID levels. CASA is nothing but current and savings account.

Operating parameters look interesting

The operating parameters of the bank too showed some rebound. Operating Profit was placed at Rs 1,360 crores, an increase of 19% Q-o-Q

Operating Profit excluding P&L on sale of investments grew 13% Y-o-Y, while the net interest margins were at 3.1%, and grew by 10 basis points quarter on quarter. The cost to income ratio was the lowest in 5 quarters. This shows that some of the operating parameters are showing a fast improvement.

Retail and corporate banking fees see strong traction

Retail Banking fees at Yes Bank were up 146% Q-o-Q with resumed traction in business activities, intensified client outreach and acceleration in digital fee income stream. This is good news for the bank with increased activity and increased volumes should augur well.

Asset quality continues to remain an area of bother

The gross non performing assets of over 16 per cent has reduced quarter-on-quarter, but, continues to be an area of concern. The next few quarters would be crucial for the bank to reduce the same.

Emphasis on retail loans

The bank is gradually looking at reducing its corporate exposure and increasing the retail exposure. We can increasingly see advertisements for retail loans. Retail composition of total advances now stand at 24% in Sep'20 from 23% in Jun'20. Gross Retail Disbursements were placed at Rs 3,764 Crs, which largely comprised secured loans.

Should you buy the stock?

The shares of Yes Bank have not gone up a great deal since the follow on public offer. The next 1-2 years would be important for the bank, though we feel that it is back on track. Investors who hold the stock for a period of 2-3 years, might see decent returns. At the moment it looks that the bank is out of the woods. How fast it grows from here is something that time will tell.

About the author

Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, commodities, debt, mutual funds and tax planning. Sunil is currently Managing Editor for Goodreturns.in