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YES Bank Q2 preview: Loss likely, asset quality may deteriorate

Edelweiss said it expects asset quality and credit cost to throw in negative surprises with higher than guided range.

November 01, 2019 / 07:41 AM IST
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Private sector lender YES Bank will report its September quarter earnings on November 1. Brokerages expect the bank to report a loss along with a decline in loan and deposits growth, and deterioration in asset quality performance.

Investors will keep a close eye on YES Bank's results as the majority of top banks have already declared good numbers with improvement in asset quality.

Kotak Institutional Equities expects the lender to report a loss of Rs 1,262.4 crore, while Edelweiss sees the loss at Rs 1,907.3 crore on lower pre-provision operating profit, net interest income and other income.

One-time deferred tax asset adjustment is also likely to hit the bank's earnings. According to brokerages, there could be single-digit degrowth in loans and deposits growth YoY, as well as, QoQ.

"We expect outstanding loans to decline around 7 percent YoY and 6 percent QoQ. Deposits will decline 7 percent YoY and there is likely to be an increase in pressure on NIM. Revenue pressure will also remain high due to weak fee income (sharp decline). We expect asset quality ratios to see further deterioration (lumpy corporate exposure)," said Kotak Institutional Equities which sees NII declining 25 percent YoY, and pre-provision operating profit falling 50 percent YoY for the quarter.

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Edelweiss also said it expects asset quality and credit cost to throw in negative surprises with higher than guided range.

Also, deposits will witness QoQ dip of 8 percent alongwith loan growth decline of 4-5 percent, and fee income trend will be volatile and higher slippages will weigh on margins, it added.

The board meeting scheduled for Friday will also be important as the name of the global investor which signed a binding offer shall be revealed.

The bank informed exchanges on October 31 that it had received a binding offer for $1.2 billion from a global investor through fresh issuance of equity shares, subject to regulatory, board and shareholders' approvals.

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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first published: Nov 1, 2019 07:41 am

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