Yes Bank Ltd. Is it Worth Investing? -

Table of Contents

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.

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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.

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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.

For more Information, Check this Video:

FY 2023 Update!

Yes Bank hit a 52-week high by reaching over Rs. 20 per share. Is it worth investing in?

Why did the “Yes Bank” rally 15% intraday?

As you’ll know, Yes Bank rallied 15% intraday to reach a 52-week high of Rs 20.5 per share; eventually, it did come down a bit and is now valued at Rs 19.7 per share.

But why did it rally so high?

The credit goes to those who gave credit. Let me explain.

On July 22nd of this year, Two private equity firms, Carlyle and Advent, proposed a deal to invest around 1 billion dollars in the bank. Essentially, the two private equity firms will invest 3,600 and 3,900 crores, respectively, and will own close to 10% of Yes Bank.

This deal comes after the ‘Yes Bank’s plans to invest around 350 crores in JC Flowers.

JC Flowers has won the bid to take over Yes Bank’s bad loan book, which is worth approximately 48,000 crores. What happened here is that, over the years, Yes Bank has made some faulty loan disbursements. You can also call it a fraud-based loan disbursement due to the then-corrupt senior management who were at fault, and here we are.

So, now Yes Bank has plans to move its bad loans to an entity called “Asset Reconstruction Company,” or ARC. If you want to know more about ARC, check out this video.

Moving on, JC Flowers was one such entity that bid for Yes Bank’s bad loans, and in return, Yes Bank will pick up 19.99% of the states in the said ARC.

What does this transaction mean for Yes Bank?

So, following the completion of the JC Flower ARC transaction, Yes Bank’s NPA, meaning the ‘nonperforming asset,” will come down from its current high of over 13% to 2%.

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As you are aware, NPA is a bank’s equivalent of cancer. It is very difficult to recover from and kills the bank’s ability to survive. Yes Bank was in trouble, with over 10% NPA. Guess what? Getting the bad loans off the books was the only viable option. In fact, it is said that the loan accounts were full of fraud and other problematic charges, and the recovery would have been a challenge.

The bank had already provisioned for over 80% of the total loan value, which will now be transferred to J.C. Flowers. Yes Bank may be able to not only survive but also thrive in the future as a result of this agreement.

Why are PE firms investing in Yes Bank?

After moving the bad loans out of Yes Bank, the bank can start a new journey. It’s something like clearing a clogged water pipe. Now, Yes Bank can lend fresh money to make more money. Well, that’s the core business of any bank, right?

So, the private lender Yes Bank is planning to raise $1 billion to boost its capital base. Thus come the two private equity firms. These are US-based private equity firms that will invest more than $1 billion in Yes Bank for stakes of more than 10%.

Carlyle is a global investment firm with deep industry knowledge that uses private capital in three business segments: global private equity, global credit, and global investment solutions.

Advent International on the other hand is one of the largest and most experienced global private equity investors. The firm has invested in over 395 private equity investments across 41 countries and, as of March 31, 2022, had $75.9 billion in assets under management.

So, you can understand their interest in investing in one of India’s most tech-savvy banks. India is the future. They understand it and want a piece of the cake.

Should we invest in Yes Bank?

I invested in Yes Bank a long time ago, and the majority of my holdings are locked until March 31, 2023. I intend to hold on to my shares for a long time. But, those who came in to rescue Yes Bank in 2020, those big banks can offload their holdings after march 2023. And if they do, such free-float equity will for sure crash the stock price. So, my advice to those considering purchasing Yes Bank right now is…

Don’t hurry. If you wish to buy Yes Bank shares, I suggest you wait until March 2023.

Those who already own the shares should not go ahead and sell them if they believe that the bank could retake its previous position as one of India’s large banks. Remember, we are in this for the long term. With this, I recall Mr. Peter Lynch’s remark, where he said that he made most of his money from his investments during the 7th, 8th, and over 9th years of his holdings. Only with such commitment can you make money in the stock market.