Yes Bank is the fourth largest private bank in India, with a presence in all states and union territories. The company claims to process one of every three digital transactions in the country, highlighting its importance in the Indian banking system.
The bank underwent an existential crisis in 2020 when the Reserve Bank of India superseded its board. A bailout package was announced that included Equity infusion by several banks, including State Bank of India, HDFC, ICICI Bank, Axis Bank and Kotak Mahindra Bank. Further, the company raised money from a bunch of investors during a follow-on public offer to strengthen its balance sheet and capital level.
As a result, SBI today holds 30% in the bank, the largest shareholder in the company, followed by HDFC and ICICI Bank, which have nearly 4% and 3% stakes in the firm. Axis Bank also holds about a 2% stake. However, despite the marquee names backing the firm, the Yes Bank share has been unable to rise as the concerns over its bad Loans, growth, and recovery from near bankruptcy are yet to complete.
The Yes Bank share price trades in the range of Rs. 12 to 13 almost daily, which is a far cry from Rs. 400 level at which it traded during its heydays. Recently, the lender reported its first full profitable year and said it plans to come out of the reconstruction scheme. The company is in the process of installing its board after running under a government-constituted board since 2020.
The question, though, is if these steps will help the lender take it to the former glory in the near term, the answer is perhaps no, as most analysts’ targets do not see much upside in the stock. However, there are some signs that the Yes Bank NSE may perform relatively better.
ICICIdirect has done a Strengths, Weaknesses, Opportunities, and Threats analysis of the lender’s business and found 11 strong points along with eight weaknesses. It sees two opportunities and one threat with the bank.
Among crucial strengths are:
– Strong annual earnings per share growth
– Return on Equity improved over the last two years, meaning the bank is effectively using shareholders’ fund
– Its Return on Assets has improved over the last two years, reflecting efficiency in managing assets to generate profits
– Increasing revenue and profits every quarter for the past four quarters
– Foreign investors are increasing their shareholding
– Growth in operating profit with an increase in operating margins YoY
According to the broker, weaknesses include:
– Mutual Funds sold shares last quarter
– Return on Capital Employed declined in the last two years, meaning inefficient use of capital to generate profits
– Weak stock price momentum, as it is below short-, medium- and long-term averages
Among the two opportunities that ICICIdirect sees are a recent decrease in bad loans and a decline in provisions. The only threat is the increasing trend in non-core income.
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