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Last Updated : Apr 26, 2019 08:57 AM IST | Source: Moneycontrol.com

Yes Bank Q4 preview: Brokerages expect profit to decline; NII may rise

Kotak Institutional Equities sees profit falling 28 percent YoY and NII growing 18.8 percent YoY

 
 
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Yes Bank is expected to register a fall in profit in Q4. The private sector lender will declare its March quarter and full year earnings on April 26.

The stock rallied 51 percent during the quarter ended March 2019, outperforming Nifty that gained 7 percent in the same period.

"Growth is likely to moderate from higher levels seen in earlier quarters, albeit still much higher than industry; asset quality tends to be benign. The strategy under new management will be key monitorable," said Edelweiss Securities that expects profit to decline 0.3 percent and NII to grow 13.3 percent YoY.

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Kotak Institutional Equities sees profit falling 28 percent YoY and NII growing 18.8 percent YoY. It expects loan growth to decelerate to around 15 percent from around 40 percent. Revenue pressure will remain high due to weak fee income growth (sharp decline) and NIM pressure (higher funding costs), it added. Kotak further said commentary from the new MD & CEO would be crucial to understand his views on the bank and steps taken to change its business model.

The research firm sees banks showing further improvement in key metrics. Impairment ratios are likely to decline led by lower slippages, recovery as well as high provisions for bad loans. Recapitalisation would result in most public banks reporting a sharp decline in net NPL ratios. Yes Bank would see a sharp slowdown in business growth and the commentary from the new management would be a key monitorable, it said.

According to brokerage firm Motilal Oswal, Yes Bank may report net profit at Rs 970.9 crore down 17.7 percent on-year. Net Interest Income (NII) is expected to increase 28.2 percent YoY (up 3.6 percent QoQ) to Rs 2,761.4 crore, it said. Pre Provision Profit (PPP) is likely to rise 17.1 percent YoY (up 25.6 percent QoQ) to Rs. 2,500.6 crore.

HDFC Securities said 2.1 percent of the bank's book still pertains to unrecognised stress, the non-watch list slippages have been sticky and asset quality has been volatile. "Factoring these, we expect slippages to take a while to trend below 2 percent," said the report.

Earlier in the day, shares of Yes Bank rose as much as 3.4 percent to Rs 247.35, its biggest intraday gain since April 9 with the scrip adding 32 percent so far this year.

Key things to watch:

-Loan growth could moderate downwards from Q3 numbers.

-Provisions can remain elevated owing to exposures in some risky assets. Slippage can remain elevated.

-Need to watch for recovery in few stressed accounts with movement in GNPA to be seen closely

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First Published on Apr 26, 2019 08:57 am
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