YES Bank shares: 57 lakh investors hit as AT-1 verdict raises RoA doubts; target prices

"YES Bank expects NIM to be stable QoQ and rise in Q4 led by tailwinds from repo rate and receding RIDF book (down INR 80bn in H2), though there is still uncertainty on prospective coupon payment. We lower our target price to Rs 17 per share (Rs 24 earlier), valuing the stock at 0.9 times FY28E ABV. On pro forma FY28E ABV, our target multiple is 1 times. Maintain HOLD," ICICI Securities said.

JM Financial said core trends at YES Bank continued to improve, but the AT-1 verdict has changed the trajectory.

"It lowers book value, pushes CET1 down to 11.4 per cent and is likely to bring a capital raise forward. Future SR recoveries and the high share of third-party distribution income also need monitoring. Together, they cast doubt on sustained delivery of 1 per cent RoA," JM Financial said.

This brokerage trimmed its FY27 and FY28 EPS estimates by 14.8 per cent and 7 per cent on account of AT-1 bonds impact. It also cut its target on YES Bank to Rs 17 from Rs 22 earlier.

Data showed YES Bank had 56,68,223 small shareholders holding nominal share capital up to Rs 2 lakhs.

For the September quarter, higher operating expenses and lower fees weighed on core pre-provision operating profit (PPOP), but profit after tax (PAT) was in line with expectations due to non-core income, Nomura said in a note.

"AT1 bond reinstatement impacts Q2 shareholders’ equity by 12 per cent. The stock is down 20 per cent post the judgement and trades at 0.9x Sep-28F BVPS. We maintain our Neutral rating with a lower target of Rs 18 from Rs 23 previously, valuing the bank at 1 time (vs 1.1 times previously) Sep-28F BVPS," Nomura said.

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 a common equity tier-1 (CET1) ratio of 11.4 per cent.

As per Bloomberg data, there are 10 'Sell' calls, two 'Buy' recommendations and two 'Hold' ratings on YES Bank, even after a 26 per cent drop on the counter in the past 12 months.

Goldman Sachs gave a target price of Rs 17 on YES Bank, while Citi sees the scrip falling to Rs 16.50. Kotak Institutional Equities and Nuvama Institutional Equities have even lower targets of Rs 16. Morgan Stanley has an 'Underweight' rating on the stock with a target price of Rs 17.

Nuvama Institutional Equities said the potential AT1 bond-related hit could constrain growth acceleration, while weak core profitability underpinned its 'Reduce' rating on the stock. It cut its target price to Rs 16 from Rs 22. SMFG's potential capital infusion remains a key monitorable, it said.

Ventura Securities maintained its 'Buy' rating and a target price 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 with expectations at 20 per cent YoY, but PPOP was higher than expected. The PAT beat was driven by strong recoveries from legacy assets, 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.