Should You Invest in Yes Bank?
In this article, we are going to discuss Yes bank stock review based on parameters like promoter stake sell, asset quality troubles and limited growth capital etc. Should you invest in Yes Bank in the scenario of recent promoter stake sell by Co-Founder Rana Kapoor.
Yes Bank Stock Review – Should You Invest in Yes Bank?
Promoter Stake Sell by Yes Bank Founder Rana Kapoor
- Yes Bank co-founder Rana Kapoor is in talks with Paytm founder Vijay Shekhar Sharma to sell his stake at the bank.
- In August Kapoor had offered to sell his stake in Yes Bank to Sharma. According to reports, he also offered the stakes of his family members for up to Rs 2,000 crore.
- Kapoor, his family members and the investment firms they control own a 9.54 per cent stake in Yes Bank. At current valuation, Kapoor and his family’s shareholding is worth Rs 1,550 crore.
- Rana Kapoor’s family owns stakes in Yes Bank through firms Yes Capital and Morgan Credits.
- If this deal follows through then it will be the first time a fintech company or its promoter will buy a sizeable stake in a commercial bank.
Deterioration in the Market Capitalization
- The market capitalization of Yes Bank is deteriorated from almost Rs.90,000 Cr (in August 2018) to around Rs.14,371 Cr as on today. (decreased by almost 84% in 12 months).
- The shock price is came down from Rs.400 to Rs.55 now.
- In spite of such a lower valuation of the stock at current date, promoter want to sell his stake in the bank. What does it indicate? Is it a signal of the dampened growth potential of the bank?
Asset Quality Troubles
- In Q1 FY2019-20, asset quality of Yes Bank deteriorated as slippages continue to rise at Rs.4,500 Cr. Out of which :
- Rs.2,500 Cr came from Watch List
- Rs.2,000 Cr was from BB & Below book
- The rating profile of the bank’s corporate exposure is shown in the above diagram.
- BB & below book rose from 7.1% to 9.4% in Q1 FY2019-20 in largely due to two financial service accounts. It is a very negative sign for bank.
- Gross NPA is increased to 5.01% in June-2019 quarter from 0.83% in September-2016. If NPAs started increasing and is more than bank’s net interest margins (NIM), then how can any bank survive?
- It shows the degradation in the asset quality of the bank and the higher corporate exposure from BB & Below rating.
Limited Growth Capital
- Deposit growth of the bank was limited to 5% YoY led by de-growth in CASA deposits YoY as well as QoQ.
- Accordingly, CASA ratio fell sharply by to 30.2% in Q1 FY20, from 33.1% in Q4 FY19 and 35.1% in Q1 FY19.
- Thus, we can see a pressure on deposit growth of bank. In the subdued CASA growth, it will be difficult for the bank to sustain future earnings.