Yes Bank Q1 FY20 Results Update

Why Yes Bank Stock is Falling?

Introduction

In this article, we are going to analyse Yes Bank Q1 FY20 results, released on 17th July, 2019. Market has reacted negatively and the stock has fallen almost 12% due to 91% drop in net profit year-on-year.

Yes Bank Q1 FY20 Results Update

Let us analyse the Q1 FY2019-20 results with respect to results of Q4 FY2018-19. Because after the appointment of new CEO Mr.Ravneet Gill, the bank has made a provision for almost Rs.2100 Crore in Q4 FY2018-19. Let see how much are the net profits for Q1 FY2019-20.

Q1 FY2019-20 Results

1.Net Interest Income (NII)

• NII is the difference between the interest earned and the interest expended. NII is the core or basic source of income for any bank.
• Here, NII for Q1 FY20 is Rs.2,281 Cr, grew by 2.8% y-o-y. NII for Q1 FY19 was Rs.2,219 Cr. But, the NII number has dropped by almost 9% as compared with Q4 FY19 (Rs.2,506 Cr). This drop in NII for Q1 FY20 is due to the absorbing impact of Rs.223 Cr of interest reversals on account of slippages during the quarter.
• Thus, NII has increased year-on-year, but decreased over quarter-on-quarter basis.

2.Non-Interest Income

• Non-Interest Income is the income from corporate banking fees, trade/remmitance, processing fees, third party sale, transaction fees etc. Non-Interest Income for Q1 FY20 is Rs.1,273 Cr from Rs.1,694 Cr in Q1 FY19 ie. dropped by 24.9% y-o-y. While as compared with last quarter, it is increased by 139.4% from Rs.531 Cr in Q4 FY19.
• Thus, this q-o-q 139.4% growth in Non-Interest Income can be seen as a positive sign for the bank.

3.Total Net Income

Total Net Income has decreased by 9.2% y-o-y Cr from Rs.3,913 Cr(Q1 FY19) to Rs.3,553 Cr in Q1 FY20. As compared with Q4 FY19, Total Net Income has increased by 17% from Rs.3,037 Cr, which is a recovering sign for the bank’s total net income.

4. Operating Profit

• The provisioning for NPAs is mainly done from the operating profits of the bank’s business.
• Operating profit for Q1 FY20 is Rs.1,959 Cr which is decreased by 20.2% y-o-y from Rs.2,455 Cr, in Q1 FY19. On the otherhand, a growth of almost 48% q-o-q is seen in Q1 FY20 as compared with Q4 FY19 (Rs.1,323 Cr).
• Thus, the provisioning towards NPAs and other Mark-to-market losses is done through this operating profit of Rs.1,959 Cr in Q1 FY20.
• In Q1 FY20, provisioning of Rs.1,784 Cr is done from operating profits, including mark-to-market losses of Rs.1,100 Cr due to downgrade of the stock. As compared with Q1 FY19, this provisioning has increased by almost 185.2% (Rs.625 Cr) and decreased by 51.3% compared with Rs.3,662 Cr in Q4 FY19.
• In Q1 FY20, new Bad loans of Rs.6,230 Cr are to be recovered from the amount Rs.684 Cr. (after deducting the mark-to-market losses of Rs.1,100 Cr from Rs.1,784 Cr. as mentioned above).

5. Net Profit (PAT)

• PAT for Q1 FY20 is come out to be Rs.113.8 Cr, with a downfall of 91% y-o-y in Q1 FY19 which was Rs.1,260 Cr. Market was expecting PAT at around Rs.164 Cr for Q1 FY20 inspite of provisioning. That is why the Yes Bank stock falled after Q1 FY29 results because of not meeting the market expectations for Q1 results.
• But, for the last quarter the bank has booked the losses of almost Rs.1,500 Cr. So, in Q1 FY20 is loss-to-profit conversion is there, which can be seen as a silver line for the company.

Summary of Balance-sheet and Key Ratios

Summary

• The stock closed at Rs 98.45, down 5.25 percent, on the BSE, ahead of Yes Bank Q1 FY20, June quarter earnings. It has corrected almost 72 percent in last one year.
• Foreign brokerage house, Jefferies has reduced the target price of the Yes bank. The stock can go up to Rs.50. Thus, due to the negative views given by such foreign institutional investors, the market has reacted negatively for the stock.