YES Bank Sees Bright Spot Amidst Turmoil, Brokerages Remain Cautious
In a rare instance of optimism, private lender YES Bank Ltd participated in several prominent conferences organized by top brokerages including Kotak Institutional Equities and JM Financial India Conference, where the bank's management offered insights into its business activities.
According to the latest updates from these brokerage firms, YES Bank has made significant strides across various metrics, effectively eradicating its reliance on low-rated corporate lending. The bank's credit card, Microfinance Institutions (MFI), and Personal Loans segments are significantly lower in comparison to its competitors, signaling a clear focus towards more conservative retail lending.
Moreover, the bank has reported considerable progress in turnaround efforts related to deposit mobilization, with total deposits increasing from Rs 1.7 lakh crore to Rs 2.7 lakh crore. This indicates a notable improvement in YES Bank's ability to attract and retain customers.
Kotak Institutional Equities revealed that YES Bank's yield on advances is comparable to large private banks, distinguishing the bank from mid-sized peers who have traditionally faced challenges in this regard.
According to Kotak Institutional Equities, the bank has identified two key levers to boost its yield: increasing pricing and shifting loan mix. As part of this strategy, YES Bank has made a conscious effort to construct retail loans in a more conservative manner, anticipating these efforts will drive loan yields closer to 10.5-11 per cent.
JM Financial India Conference also expressed optimism, asserting that YES Bank expects to gradually increase its return on asset from the current rate of 0.5 percent to 1 percent by focusing on improving margins through asset mix adjustments and organic growth.
The brokerage foresees a significant recovery in loan losses for SRs (secured receipts) totaling above Rs 4,000 crore, which will further strengthen the bank's financial position. Additionally, JM Financial noted that YES Bank is taking proactive steps to "right-size" its organization, with potential benefits still to be realized.
However, amidst these upbeat notes, both Kotak Institutional Equities and JM Financial have maintained a 'sell' rating on YES Bank shares, citing concerns surrounding the bank's growth prospects. While the target price has been set by Kotak at Rs 18, NO official statement was made against this line of thinking
As YES Bank shares climbed 4.63 per cent to Rs 20.10 apiece on Tuesday, investors would be eager to see if the bank's momentum can hold up despite remaining doubts from analysts.