Yes Bank Ltd. Is it Worth Investing?

Yes Bank Limited Stock Analysis Is It Worth Investing

Business Introduction:

Yes, Bank Limited is a private sector bank. Yes Bank provides banking services to businesses and institutions, including corporate and institutional banking, financial markets, investment banking, corporate finance, wealth management, etc.

Yes Bank was founded in the year 2004. Currently, it is India’s 7th largest private bank in terms of total assets, ranking 7th among the country’s 18 largest private sector banks.

Yes Bank has a Pan India presence with 1,070 Branches.

Fundamental Analysis:

Yes Bank’s market cap is at 34,500 crores, its total Asset is at over 2.88 lakh crore with advances at over 1.72 lakh crore out of which, 49% to Corporates and 51% to MSME and Retail division. Yes Bank has been trying to minimize its corporate advances and is on track with it. 

Gross NPA and Net NPA stood at 15% and 5.5% respectively. Net NPA, the recovery is very slim. NPA is very high compared to Banks such as HDFC and ICICI. 

And Capital adequacy ratio (this is to check whether the bank has sufficient capital, and is calculated as available capital divided by risk-weighted assets) is at 17.6%, the limit as per RBI is at 9%, anything higher is better. And, CASA ratio I.e, (Current Account – Savings Account deposit to Total Deposit) is at 29.4%. 

Management has done a commendable job in regards to bringing in trust and hope over the bank and thus attracting new deposits. 

Yes Bank in recent quarters started making real money aka, a net positive. And, the bank earned the highest profit since 2018 in Q2 FY 2022, of about Rs. 225 crores. Yes, obviously it’s less. But, see the trend! Yes Bank since March 2020 has shown tremendous improvements. But a long way to go!

The current ROA is at 0.32%; ROE at 2.69% and Earnings Per Share is at Rs.0.09 per share. 

And, When it comes to IMPS and UPI transactions, Yes Bank is the market leader with a 44% market share of 3 Billion $ monthly transactions.

Technical Analysis:

Yes Bank has too many free float Equity shares and most of it is held by Retail Investors. Slow but steady, the trend here seems to be picking up. But, patience is extremely important and this stock is not for traders. 

Both RSI & MFI shows a mid-range. An average movement.

If Yes bank drops below 12.5, the next low is at 12.1

I don’t see Yes Bank dropping below 12 as of now. Q3 result may change this pattern.

SWOT – Risk Analysis:

Opportunity & Strength 

  • Since reconstruction, Yes Bank has seen a steady improvement in Liquidity position.
  • SBI remains the largest shareholder of Yes Bank with a 30% shareholding. 
  • Asset reconstruction company (ARC) is proposed to transfer its pool of stressed assets thus shifting NPA load off the books.
  • YBL has taken shareholder approval for raising capital up to Rs. 10,000 crore, which could be instrumental in addressing the potential asset quality stress.
  • Considerable improvements in Deposits are seen.

Weakness & Threat

  • Exposure to a stressed telecom company remains high!
  • Asset Quality Pressure is expected for a few more quarters and the Pandemic is making the situation worse. 
  • Slippage in Loan book Advances affecting the profitability of the company.

Conclusion:

I have been holding Yes Bank since its March fiasco, I entered the bank when it was selling in single digit. And thus most of my holdings are locked for now. And, I have no issues holding on to the company for a long term say 5 years or so.

Does it mean I’ll add more? No!

Unless I see some real improvements. I rather stay put with my current position. 

For any company, management is very important. In Yes Banks case, it had lousy & corrupt management but now that has changed. With that, even efficiency is seen. You can’t compare a dying bank to some of the well-established banks in the industry. But, if you compare the current Yes Bank to the one it was a year ago. The improvements in its books are appreciable.

Overall, I’ll give a 7/10 rating because of the efforts made by the management & I see potential in the Bank. Hence, I have invested in the Company and wish to hold on for the long term.

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