Yes Bank Shares: Should you buy, sell or hold after Q2 result?

• Yes Bank reports 32% drop in its Q2 net profit on higher provisions

Yes Bank reported a 32% decline in its net profit at ₹153 crore for the quarter ended September 2022, as compared to ₹225 crore in the year-ago period, on higher provisions. Its core net interest income rose 31.7% to ₹1,991 crore during the quarter, led by an 11% increase in loans and a 0.40 percent increase in net interest margin at 2.6%.

"The miss (in earnings) was primarily on account of higher estimated credit cost by 1.1%, age related provisioning and accelerating provisioning on securities receipts," ICICI Securities said in a note.

Brokerage SES sees changes in relevant operating metrics and improved confidence in the sustainability of the franchise. Nevertheless, it remains aware of the risks arising from delay in resolution of the stress pool, net labeled exposure of 4.3 per cent, modest RoE profile during transition and supply overhang after expiry of locked-in shares. ICICI Securities has retained its hold tag on Yes Bank shares with an unchanged target price of ₹15.7.

“YES Bank net earnings declined by 32% on a year-on-year basis due to elevated provisions, which increased by 54%. Another brokerage and research firm Nirmal Bang said advances growth was healthy at 3.2% QoQ (11.3% YoY), while deposits also maintained good momentum and grew at 3.5% QoQ (13.2% YoY).

The ARC transaction is expected to help reduce on-balance sheet stress and enable the bank to focus its management efforts on business growth. Management expects the deal to be completed by the end of November. On the operations front, the numbers were stable, with improved margins and healthy growth in non-interest income, it added.

“Operational expenses remained high due to branch expansion and technology investment. The bank is awaiting RBI's nod and expects to raise funds before the end of FY23. We have not invested any capital in our estimates and will be watching closely for approval to make changes,” according to the brokerage house, which has maintained a sell rating on the bank stock with a target price (TP) of ₹14.8 per share.