Technical View:
Looking at the chart, Yes Bank (CMP:692) has strong support zone of 680-655 and sustained below 645-625-604 & 590-570-545-520 might be the target in the near term (worst bear case probability).
On the brighter side, sustaining above 680, immediate to short term target will be 702-710 & 730-740-757-782. Only consecutive closing above 782, it may target 795-805-821-836-850 in the mid term. In the long term, sustaining above 850, Yes Bank may also scale 885-907 zone and consecutive closing above that 1250 area might be the target by FY:17-18 (bullish case scenario).
Trading Levels (Positional):
| SL</>5 | FROM SLR | |||||||||
| Yes Bk | CMP | 692 | ||||||||
| T1 | T2 | T3 | T4 | T5 | T6 | T7 | SLR | |||
| Strong > | 670 | 702-710* | 730-740 | 757-782* | 795-805 | 821-836 | 850-885 | 898-907 | <655 | |
| Weak < | 655 | 645* | 625 | 604 | 590* | 570 | 545 | 520 | >670 | |
Rationale:
Yes bank suffered significant correction for the last few days (around 19% against Nifty correction of 5%) and under performed the broader market clearly.
This may be due to concern of payment banks license to certain strong corporate groups which may increase competition and affect overall operating margin and CASA ratio. Yes bank traditionally offer relatively higher rate of interest on certain category of savings account. But we have to keep in mind that it caters to mainly well to do types of clients (HNI/Semi HNI) and for them, full and convenient banking facility is more important, which the new payment banks may not offer as of now. Being a new generation and tech savvy bank, a new small payment bank can't be its competitor overnight. The bank is active in wealth advisory and planning to launch mutual funds business either in an organic or inorganic way.
Another issue was that there was a market report about both Yes & Indusind Bank that they are eyeing RBS's India portfolio. Although the same was termed as "pure speculative" by Yes Bank at this early stage, the market might be taking it as negative as the the likely acquisition will make the balance sheet more stretched for the Yes Bank. If the deal really materialize in future, then the fine print of the same will decide the next course of movement in its scrip.
The other issue may be the old one and that is UBS downgrade in July of Yes Bank, citing vulnerability of significant loan exposoure to certain stressed corporate groups, which may default in the days ahead (NPL/NPA). But, that issue too may be termed as blown out of proportion and the management clarified that the bank has indeed sanctioned the credit line to some of the corporate groups which are stressed now, but the bank did not disburse the full credit line as sanctioned and working closely on the issue case by case basis. Again, this practice is quite normal in banking industry and as par BOA-ML & Macquarie "all was well" with Yes Bank.
Q1FY16 result was also above street expectations amid higher net interest income, operating margin and higher other income aided by banking transaction fees, cross sale of third party products (Life Insurance), wealth management products etc. But its asset quality has weakened and provisions for bad loans shot up with significant surge in NPA, which under performed the market estimates.
Going ahead, the management is confident of its full year guidance for FY16 and sees growth in retail/SME banking, specially in CV finance. Due to expected overall economic recovery in H2FY16, corporate business may also see sequential higher growth and the overall banking industry, including Yes Bank may be the major beneficiary of that.
To support growth and future expansions, Yes Bank is planning to raise around Rs.750 cr in Q2FY16 and $1 billion by ADR or QIP route within FY16.
The bank is also fast expanding domestically by opening new branches and also in Gulf countries for potential NRI deposits.
But the ongoing litigation between Kapoor families (promoter of Yes Bank) need to be settled at the earliest, as although this issue will not affect the performance of Yes Bank materially, the market may not like any uncertainty in its top management (for some directors).
Valuations As Par BG Metrics (Techno Funda Model):
Current Median Valuation: Rs.900
Projected Fair Valuations: Rs.975-1090-1215 (FY:16-18)
(As par current market parameters)
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | LONG TERM | SHORT TERM | MEDIAN VALUE | 200-DEMA | 10-DEMA |
| YESBANK | 50.8 | 279.21 | 20.5 | 898.50 | 895.39 | 896.95 | 775.21 | 769.86 |
| YESBANK | 59.95 | 395.3 | 20.5 | 976.07 | 972.70 | 974.38 | 775.21 | 769.86 |
| YESBANK | 74.63 | 559.35 | 20.5 | 1089.04 | 1085.27 | 1087.16 | 775.21 | 769.86 |
| YESBANK | 92.95 | 791.45 | 20.5 | 1215.38 | 1211.18 | 1213.28 | 775.21 | 769.86 |
Technical Charts:
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