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    Will YES Bank bounce sustain? It hinges on fund raising, say analysts

    Synopsis

    Gill on Thursday said the bank is in advanced stage of capital raising from investors.

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    Shares of YES Bank advanced for the second straight session on Friday after the lender said its financials are strong and liquidity is well in excess of regulatory requirements. But analysts say the bounce in the stock may be shortlived if the bank fails to raise capital quickly.

    YES Bank CEO Ravneet Gill on Thursday said the bank is in advanced stage of capital raising from investors, including global tech majors, to grow the balance sheet that has been shrunken consciously in recent months.

    However, Abhimanyu Sofat, VP-Research, IIFL, says if it drags around for another month – the bank management just keeps talking about fund-raising plans and nothing materialises – there will be more pressure on the stock going forward.

    The stock had cracked nearly 83 per cent between January 1 and October 1 to hit Rs 32 on Tuesday before staging a smart rebound on Thursday. Indian markets were closed on Wednesday on account of Gandhi Jayanti.

    Anusha Raheja, BFSI Research Analyst, LKP Securities, said sale of pledged shares is done and the loan book has de-grown on a QoQ basis in order to conserve capital. “The bank can raise capital based on last two weeks’ average share price. It has no pressure to merge with other banks. Now, capital raising will be crucial for the bank, which if done, will be a big positive for it,” he said.

    After rising nearly 33 per cent on Thursday, shares of the private sector lender climbed another 7.87 per cent to hit an intraday high of Rs 45.90 on Friday.

    Brokerage firm Sharekhan said YES Bank currently trades at around 0.4 times its FY2021E book value, which reflects concerns over its business outlook. There are significant challenges before the lender, with a large stressed pool, which at the current state of threshold capital position, is a key risk.

    An assessment by the brokerage indicated that even if the bank gets equity infusion at twice the current market price, the same will lead to significant dilution of book value, which will not only be an overhang on the multiples but also impact return on equity (ROE).

    “Given multiple risks and uncertainties, we continue to maintain a ‘hold’ rating on the stock with the price target under review,” Sharekhan said.

    Replying to a query on depositor concerns in the wake of a reduction in deposit base, Gill said this has to be seen in the context of a shrinking asset base, and noted that the bank added 1.80 lakh new accounts during the September quarter. But its balance sheet has shrunk by over 4 per cent now over last year. New deposits are up 13 per cent quarter-on-quarter, he said.

    The bank is engaged in regular discussions with RBI and the finance ministry, and both want a “strong and independent” YES Bank, Gill said on Thursday, responding to a query on whether a merger has ever been discussed.

    Vinod Nair, Head of Research, Geojit Financial Services said, “Volatility in YES Bank stock is likely to reduce in the coming days. The bank is aiming to conserve capital and focus on asset quality. Thursday’s rally in the stock followed a clarification from the CEO and the bank management, which committed to stick with the guidance.”
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    11 Comments on this Story

    Gee Varghese Daniel351 days ago
    t75757575
    RaMa Rajya352 days ago
    Yes Bank current management focus must be on cleaning of dirt created by Rana Kapoor and Ajay Kumar former ED and his associated people.
    D Samanta352 days ago
    Media or Agent
    The Economic Times