The foreign broking house views the bank's $1.2 billion capital raise from a global investor as a positive as it would improve the CET 1 ratio by 260 bps
Shares of private lender Yes Bank declined 4.6 percent in early trade on November 1 after Morgan Stanley maintained its underweight rating on the stock with a target of Rs 55 per share. It believes the risk reward is unattractive.
The foreign broking house views the bank's $1.2 billion capital raise from a global investor as a positive as it would improve the CET 1 ratio by 260 bps. It feels this step will limit the downside, but expects a gradual turnaround to limit the upside.
The bank has a very high exposure to stressed sectors, which will take time to resolve company lacks a strong retail franchise and/or high-margin growth engine, Morgan Stanley added.
The company 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.
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.
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 November 1 will also be important as the name of the global investor which signed a binding offer shall be revealed.At 10:08 hrs Yes Bank was quoting at Rs 69.30, down Rs 1.1, or 1.46 percent lower, on the NSE.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.