YES Bank shares down 27% in 30 days; target prices; one key trigger to watch

YES Bank shares have fallen 27 per cent in the past one month, largely on account of the likely AT1 bond-related hit that threatens its growth acceleration going ahead. All eyes will be on its single largest shareholder, Sumitomo Mitsui Financial Group (SMFG), as it may need to infuse capital, analysts said.

To recall, the Supreme Court upheld the write-down of Rs 8,415 crore of AT1 bonds on October 15. YES Bank did not recognise any impact in its September quarter results, but its indicative pro forma figures show a net loss of Rs 5,217 crore and CET1 of 11.4 per cent.

The stock fell 3.54 per cent on Monday, 3.42 per cent on Friday and a sharp 14.53 per cent on Thursday. Markets are closed today on account of Dussehra.

Nuvama Institutional Equities said SMFG may need to infuse capital, potentially taking its stake above 26 per cent and triggering an open offer. A majority stake could also pave the way for a merger of its NBFC, SMFG India Credit Co Ltd, with the bank.

"Thus, SMFG’s response to these developments remains a key monitorable," it said. For now, the brokerage believes the potential AT1 bond-related hit could constrain growth acceleration, while weak core profitability underpins its ‘REDUCE’ rating. It has cut the target price to Rs 16 from Rs 22, based on 0.9 times September 2028E ABV.

SMBC held 7,81,47,53,318 shares, or 24.90 per cent stake, in  YES Bank as of September 30

Ventura Securities maintained its ‘Buy’ rating and a price target of Rs 24.2, implying 39 per cent upside over the next 24 months from the prevailing price.

On YES Bank's Q2 results, Goldman Sachs said core revenue growth was in line at 20 per cent YoY, but PPOP was higher than expected. The PAT beat was driven by strong legacy recoveries, which tend to be volatile.

"NIM declined 10 bps QoQ, and adjusted for the impact for leverage against FCNR-B deposits, we believe the underlying margins moderated sequentially. Loan growth, ex-FCNR related impact was 3 per cent QoQ and 16 per cent YoY as disclosed earlier - this was helped by commercial banking as expected," Goldman Sachs said.

Goldman Sachs said it awaited more clarity on coupon liability on these AT1 bonds in the earnings call scheduled for Wednesday.