Yes, the Bank’s shares are cheaper than they were a year ago – and that could jumpstart investment, if any.

• Yes, the bank’s share price has almost halved over the past year, but analysts are not recommending investors “buy”.
• Even at ₹ 13.55 per share, there is a chance that the stock is overvalued.
• Experts believe Yes Bank may opt for another round of funding in the near future to try to consolidate its provisions as the second wave of the pandemic subsides.

When the Reserve Bank of India had to save Yes Bank from collapse in March 2021⁠ – at the same time the pandemic hit us all unexpectedly ⁠ – the double blow got the better of the share price which reached a low of ₹ 23.95. .

Today it is ₹ 13.55 – almost half of what it was in a year. This, 14 months after the RBI placed Prashant Kumar, the former deputy managing director of the State Bank of India, to prevent Yes Bank from becoming rubble. At the same time, his peers have made money for their investors, while those who bet on Yes Bank, or find a good deal anytime over the past year, are disappointed.

Source: NSEThe latest shock was a net loss of ₹ 3,788 crore in January-March 2021, triggering a new wave of ‘sell’ calls. Some of these goals, set at any time over the next 12 months, have already been met. This is how quickly the stock has fallen.

Yet even at this price, analysts are not bold enough to say “buy”. “The actual value can be much lower, if you look at the book value compared to other banks,” Vikram South, chairman and consultant at VSS Advisors and independent director of the board of directors of DBS Bank, told Business Insider. .

Source: respective reports

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A year earlier, between January and March 2020, people who had an idea that the company – at the time run by Rana Kapoor who is currently housed at Taloja prison – was running on smoke, had already withdrawn their money. . The average depositor followed later.

These small deposits, also known as the CASA (current account to savings account) ratio, are the cheapest source of funds for any bank to make money. There are no more runs on the bank and therefore, this number has shown remarkable growth over the past three months. For every ₹ 10 that depositors parked in the bank a year ago, there is now ₹ 15.2.

“Over the next 3 years, we will continue to focus on doubling the deposit book and increasing the customer base to almost 3 times. And we also aim to improve our CASA ratio to 40% and double the cross-sell ratios, ”Kumar said during the Bank’s fourth quarter earnings call.

However, the street is also wary of this number. “If you ask, not every customer would be sure to put their money in Yes Bank right now. I don’t know if they have enough transparency about what kind of clients can give them those deposits, ”an Emkay Global analyst told Business Insider.

Depositors’ trust, or lack of trust, is not the only fear about Yes Bank

The problem with Yes Bank was that, under Rana Kapoor, she had made a lot of loans that would not come back and she kept brushing bad loans under the rug until there was a lot more than she did. could hide.

The issue of elusive borrowers may still linger. Even in the first three months of 2021, the lender had to write off just over ₹ 6 out of every ₹ 100 he gave. The amount of those constrained loans, the ones that are more likely to turn sour, is still high, even though it is only a quarter of what it was three months earlier.

Source: Yes Bank Fourth Quarter 2021 and Fourth Quarter 2020 Results Report

Yes, the CEO of the bank wanted to get rid of bad loans but couldn’t

The private bank’s plan was to obtain a license from the Reserve Bank of India (RBI) to establish a separate Asset Reconstruction Company (ARC). This ARC would buy the bad debt of the bank at a discount, help it wipe out balance sheets and start growing from there. According to the bank’s chief executive, Prashant Kumar, Yes Bank hoped to deposit nearly 50,000 crore in bad debt with the CRA. However, the RBI rejected this request in March. citing a conflict of interest.

“Once the stock has been raised [last year], they or they [Yes Bank] told investors they would like to apply for a separate ARC and were confident they would get permission from the RBI, where they would essentially park all the bad assets. But that didn’t happen, ”said Emkay Global.

However, according to Kumar, the option of setting up an ARC is still on the table. “This option is still alive and we would wait for more clarifications from the regulator after the publication of the report of the expert committee that they drafted,” he said.

Meanwhile, experts believe Yes Bank may opt for another round of funding in the near future to try to consolidate its provisions as the second wave of the pandemic subsides. “The market updates all the knowledge known to date. If new information comes out tomorrow, the stock will react accordingly, ”an analyst said on condition of anonymity.

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