InvestorQ : Why did Yes Bank fall so sharply today after the rally over the last few days?
Dhwani Mehta made post

Why did Yes Bank fall so sharply today after the rally over the last few days?

Khushi Patel answered.
2 years ago

Of course, the bank gave up some of the rally of the last few days but the fall was also due to very bad results announced during the September quarter. Let us quickly look at the results. Yes Bank Ltd showed bigger-than-expected loss for the second quarter due to higher deferred taxation and also due to worsening asset quality.

Let us look at profitability. Net loss for the September quarter came in at Rs.600 crore compared to a profit of Rs.965 crore in the same quarter last year. Loss is almost twice the loss anticipated by the analyst consensus view. Even the NII (net interest income) fell by 9.6% to Rs.2186 crore billion, while the bigger worry was that the net interest margin (NIM),narrowed sharply from 3.3% to 2.7%. Of course, the bank also took a Rs.709 crore hit on account of the deferred tax adjustment due to shifting to the new corporate tax structure of paying just 22% tax as compared to 30% earlier.

In fact, if you see the statement of the CEO, he has warned that the credit squeeze had hurt the bank’s asset quality. Yes Bank already had a very ambivalent portfolio with large exposure to troubled sectors like infrastructure, aviation and housing finance. In fact, the gross NPAs rose sharply from 5.01% to 7.39%. The gross NPA situation may get worse going ahead as more stressed assets are revealed. It is a stock that can be avoided for the time being.