YES Bank share fell over 3% today amid a report that the Reserve Bank of India rejected the lender's plea to set up an asset reconstruction company for bad loans. YES Bank stock lost 3.14% to Rs 15.40 against previous close of Rs 15.90 on BSE. YES Bank share is trading lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
The large cap share has lost 38.75% in one year and fallen 12.37% since the beginning of this year. Market cap of the lender fell to Rs 39,210 crore on BSE.
Most of the stressed loans of the lender are declared fraud cases and hence cannot be transferred to an ARC. Hence, the proposal was turned down citing a conflict of interest, a report by LiveMint stated.
In September 2020, YES Bank sought nod of the RBI to launch the ARC which was to be operationalised within six months of getting the apex bank's nod.
According to a Reuters report, the bank was expecting to transfer nearly Rs 50,000 crore of bad loans to the ARC. In terms of brokerage views, Emkay Research has given a 'Sell' rating to the stock and set a target price of Rs 11 , given sub-par return ratios and unfavourable risk-reward with higher valuations.
"We believe that the transfer of NPAs to a separate ARC (somewhat similar to IDBI in 2003) probably means window dressing standalone bank B/sheet,but we need to see the extent of hair-cuts, structure of ARC and recovery record in the ARC, which is not inspiring in case of IDBI SASF," Emkay Research said in its report.
Kotak Institutional Equities also has a sell rating for the stock with a fair value of Rs 11, at a downside of 32%.
Similarly, ICICI Securities said in a recent note that YES Bank's December-quarter earnings have aggravated fears of its asset quality issues and gave a "hold" rating on the stock with a revised price target of Rs 16.
"The portfolio vulnerability becomes visible from, a spike in standstill non-performing loans or NPLs (from 1.5% to 5%), SMA-2 pool (from 2.4% to 4%), SMA-1 (from 1.6% to 7.3), and additional restructuring outside of this pool at 3.2% over and above the labelled non-performing assets at 22%," it added.
Brokerage house Geojit, as well as BNP Paribas, have a sell rating for the stock and reduced its TP. Nirmal Bang also continues to maintain a negative outlook on the bank and values the stock at Rs 13, based on 1.0x FY23E ABV.
The free-fall in YES Bank's stock to double digits was on the back of corporate governance lapses and under-reporting of NPAs. This led to the placement of the lender under a moratorium by the central bank last year. A consortium of lenders led by the country's largest lender- State Bank of India infused money into the bank to bail it out from deteriorating financial health.