InvestorQ : Why has Yes Bank reported a big loss in the quarter? I hold shares in Yes Bank; should I hold it or sell it off?
Lavanya Subramanian made post

Why has Yes Bank reported a big loss in the quarter? I hold shares in Yes Bank; should I hold it or sell it off?

Answer
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ishika Banerjee answered.
1 year ago


Yes Bank had seen a sharp rally in price from lower levels after the new CEO Ravneet Gill replaced the Yes Bank founder, Rank Kapoor as CEO. However, asset quality has been a challenge for the bank.

How did the Q4 results look like for Yes Bank?

In the fourth quarter ended March 2019, Yes Bank reported its largest loss in 14 years at Rs.(1507 crore). This was largely driven by a spike in bad loans recognized and they pertained largely to the IL&FS group and to Jet Airways. In both the cases, the chances of recovery are extremely dim. This contrasts with a profit of Rs.1179 crore in the corresponding quarter last year. Although the net interest margin (NIM) contracted by 30 bps, the credit growth at 18.7% was quite robust. The problem actually came on the asset quality front. For example, the gross NPAS of the banks dipped sharply from 2.10% top 3.22% as the bank reported gross slippages of Rs.3481 crore in the quarter. This was largely on account of recognizing NPAs of IL&FS, Jet Airways and also making investment provisions in the light of rising bond yields.

Should you hold or sell Yes Bank at current prices?

Valuations may not really matter or even reflect the true picture when there are doubts over the asset quality of the bank. The sharp rise in gross NPAs only points to the fact that there could be more such cases in the future too. It may be too difficult for Yes Bank to justify the current price of the stock in the light of such a sharp fall in profits. We suggest that you should take money off the table and shift to other banks like RBL Bank or even Axis Bank where there are signs of better management of bad assets.



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