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YES Bank shares rally 30% as analysts say key concerns addressed

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NEW DELHI: YES Bank shares soared 30 per cent in Thursday’s trade after the lender received “no observation on divergence” in the bank’s asset classification and provisioning in the RBI’s Risk Assessment Report for FY2018.

The scrip rose 28.95 per cent to hit a high of Rs 218 on BSE. On NSE, the scrip jumped 29.97 per cent to hit a high of Rs 220.25.

Brokerage Motilal Oswal Securities said RBI’s report has removed challenges that the new management might otherwise have had to align the bank’s asset quality standards to RBI’s requirements.

More importantly, it reinforces investors’ confidence in the bank which was shaken over the past six months and enables the bank to shore up its capital base as the new CEO takes charge and normalcy returns to operations, said the brokerage.

“With two of the key overhangs addressed (management and divergence), we expect YES to now look at other key issues facing the bank, viz., attrition at top management and capital raise. Clarity on these will drive a further recovery in the stock price, in our view,” said Motilal Oswal Securities.

Jefferies said that the brokerage had thought that RBI’s refusal to allow the reappointment of Rana Kapoor as CEO of Yes Bank was a black swan event.

“However, with the RBI’s audit report now citing nil NPL divergence, we seem to have mistaken a mere crow for a swan. We now await the bank’s new strategy, if any, as the risk-audit report has made the balance sheet pristine.,” the brokerage said.

This brokerage said that since the YES Bank board had already inducted two additional independent directors, RBI may approve both Ashish Agarwal (Chief Risk Officer) and Rajat Monga’s elevation to the board as Executive Directors, which may be viewed favourably by the markets.

With the key uncertainties now addressed, we expect gradual normalisation of operating performance and consequent valuation multiples, said SBICAP Securities.

Source: Economic Times