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Appointment of Ravneet Gill key trigger for Yes Bank; Should you buy, sell or hold?

With the appointment of new MD & CEO, focus will now shift to business as usual and will take away near-term overhang from the stock, suggest experts.

January 25, 2019 / 10:54 AM IST
Yes Bank

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Yes Bank registered a 7 percent fall in its December quarter net profit at Rs 1,001 crore against Rs 1,076.8 crore in the same quarter last fiscal, but what came as a positive surprise was the appointment of new Managing Director and CEO which removes most of the uncertainty regarding management change.

The bank announced the appointment of Ravneet Gill as MD and CEO w.e.f March 1, 2019. Currently, Ravneet Gill is CEO of Deutsche Bank India.

Yes Bank’s stock has corrected significantly since the RBI disapproved Rana Kapoor’s continuity as the MD & CEO of the bank. It fell over 40 percent in the last 1 year.

Now with the appointment of new MD & CEO, focus will shift to business as usual and will take away near-term overhang from the stock, suggest experts. The appointment of new MD & CEO will also drive balance sheet consolidation, they say.

“We believe that with this appointment, the concerns surrounding the bank would gradually get resolved and the focus would return to the operating performance of the bank,” Motilal Oswal said in a report.

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“The manner in which the bank under its new leadership addresses key issues and reverts to normalised operating performance will determine the stock performance in the near-to-medium term,” it said.

We have collated views from different brokerage firms which reacted post Yes Bank Q3 results:

Motilal Oswal: Buy| Target: Rs 270

With management overhang now behind, the brokerage firm expects Yes Bank to now focus on addressing the key issues of (a) capital raising, (ii) corporate governance on asset quality/divergence and (iii) top management continuity and employee morale.

YES has been in a capital conservation mode, which is likely to impact balance sheet growth over the near term. Motilal slashed its net profit estimates by 9%/12% for FY19/20.

Edelweiss Financial Services: Buy| Target Rs 279

Resolution of the management uncertainty with the appointment of Mr. Ravneet Gill as CEO & MD will be a key trigger. Key positives: a) amidst uncertainties, Yes delivered strong performance with NII growth of over 40 percent; b) robust retail franchise creation continued, and c) slippages (ex-IL&FS) curtailed at 0.7 percent and stress pool contained sub-2 percent.

Also, recognition of IL&FS (two-third of exposure) as NPLs with 22 percent provisioning on overall exposure prunes future uncertainty. These near-term headwinds notwithstanding, intrinsic franchise value with superior RoE renders risk-reward favourable.

Credit Suisse: Neutral| Target: Rs 250

The appointment of new CEO should drive balance sheet consolidation. The global investment bank slashed earnings estimates by 10-20 percent.

Deutsche Bank: Buy| Raise target to Rs 280

The private sector lender seems to be coming out of the woods, and the new MD appointment key positive. However, some transition pangs may likely to linger in the near-term. Valuation looks attractive while the risk-to-reward ration appears favourable for investors.

Citigroup: Neutral| Target: Rs 240

The CEO appointment is a big positive for the stock as growth slowdown was becoming a concern. And, chances are that growth might remain constrained for the next few quarters until the CEO takes charge fully.

Nomura: Neutral| Target Rs 245

The uncertainty around asset quality still lingers. The key uncertainty will be RBI’s divergence report/any likely kitchen sinking.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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