Yes Bank tanks 14%, posts biggest percentage drop since October 2008
Given the weakness in the stock, most analysts expect Yes Bank as one of the better stocks and investors can look at entering on dips.
By ET Online | Updated:
NEW DELHI: Yes Bank Ltd plunged over 14 per cent in trade on Wednesday to post its biggest percentage drop since October 2008 amid weakness in other financial stocks after the Reserve Bank of India ( RBI) took additional steps to check volatility in the currency.
At 01:50 p.m.; Yes Bank was trading 13.1 per cent lower at Rs 381.25. It had hit a low of Rs 375.10 and a high of Rs 423.20 in trade today.
Better than expected results from the private sector bank failed to support the stock. Yes Bank reported a 38 per cent jump in the net profit numbers for the quarter ended June 30 to Rs 401 crore helped by higher interest income and robust loan growth.
ET Now expected the private sector bank to report a net profit of Rs 379 cr in the June quarter. The mid-sized bank had posted a profit of Rs 290 crore in the year-ago quarter.
"Yes Bank reported a strong operating performance during the quarter. Due to recent macro developments, the outlook on trading gains going ahead appears challenging," said Vaibhav Agrawal, VP-Research , Banking at Angel Broking.
"We believe all the positives for Yes Bank are factored in, while going forward outlook for coming quarters is challenging and hence recommend a Neutral rating for the stock," he added.
On Tuesday, the RBI reduced the liquidity adjustment facility (LAF) for each bank from 1 per cent of the total deposits to 0.5 per cent, thus limiting the access to borrowed funds from the central bank, in an effort to arrest the rupee slide.
Governor Duvvuri Subbarao cut the funds RBI lends to individual banks under the liquidity adjustment facility (LAF) to 0.5 per cent of the deposits of a bank.
According to analysts, RBI measures are likely to have a three-fold impact on banks in terms of growth, margins as well as asset quality.
Yes Bank has high dependence on bulk deposits and rising bond yields will lead to high mark-to-market (MTM) losses. Its portfolio comprises of 70 per cent of deposits.
"Wholesale funded banks such as Yes Bank, IndusInd Bank and Kotak Bank are going to be worst impacted," Credit Suisse said in a report. Apart from the impact on funding cost and margins, growth is now likely to be much lower than the earlier growth trajectory of these banks, the report added.
Given the weakness in the stock, most analysts expect Yes Bank as one of the better stocks and investors can look at entering on dips.
"Yes Bank is wholesale funded, but their CASA is steadily improving and it is already at 19%. They are not really going to be impacted as much as the PSU banks and probably this is the time to really buy these high-quality names at cheaper valuations," said Rakesh Arora, Managing Director & Head of Research, Macquarie Capital Securities in an interview with ET Now.
"We are expecting rural demand to pick up given that monsoons are decent. Government spending is going to pick up in the second half," he added. Arora is of the view that there is no need to panic and I would buy good-quality private sector banks.
At 01:50 p.m.; Yes Bank was trading 13.1 per cent lower at Rs 381.25. It had hit a low of Rs 375.10 and a high of Rs 423.20 in trade today.
Better than expected results from the private sector bank failed to support the stock. Yes Bank reported a 38 per cent jump in the net profit numbers for the quarter ended June 30 to Rs 401 crore helped by higher interest income and robust loan growth.
ET Now expected the private sector bank to report a net profit of Rs 379 cr in the June quarter. The mid-sized bank had posted a profit of Rs 290 crore in the year-ago quarter.
"Yes Bank reported a strong operating performance during the quarter. Due to recent macro developments, the outlook on trading gains going ahead appears challenging," said Vaibhav Agrawal, VP-Research , Banking at Angel Broking.
"We believe all the positives for Yes Bank are factored in, while going forward outlook for coming quarters is challenging and hence recommend a Neutral rating for the stock," he added.
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On Tuesday, the RBI reduced the liquidity adjustment facility (LAF) for each bank from 1 per cent of the total deposits to 0.5 per cent, thus limiting the access to borrowed funds from the central bank, in an effort to arrest the rupee slide.
Governor Duvvuri Subbarao cut the funds RBI lends to individual banks under the liquidity adjustment facility (LAF) to 0.5 per cent of the deposits of a bank.
According to analysts, RBI measures are likely to have a three-fold impact on banks in terms of growth, margins as well as asset quality.
Yes Bank has high dependence on bulk deposits and rising bond yields will lead to high mark-to-market (MTM) losses. Its portfolio comprises of 70 per cent of deposits.
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"Wholesale funded banks such as Yes Bank, IndusInd Bank and Kotak Bank are going to be worst impacted," Credit Suisse said in a report. Apart from the impact on funding cost and margins, growth is now likely to be much lower than the earlier growth trajectory of these banks, the report added.
Given the weakness in the stock, most analysts expect Yes Bank as one of the better stocks and investors can look at entering on dips.
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"Yes Bank is wholesale funded, but their CASA is steadily improving and it is already at 19%. They are not really going to be impacted as much as the PSU banks and probably this is the time to really buy these high-quality names at cheaper valuations," said Rakesh Arora, Managing Director & Head of Research, Macquarie Capital Securities in an interview with ET Now.
"We are expecting rural demand to pick up given that monsoons are decent. Government spending is going to pick up in the second half," he added. Arora is of the view that there is no need to panic and I would buy good-quality private sector banks.
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