Following an extremely public crisis, YES Bank which was earlier on a good trajectory to become one of the more significant lenders of the country is now trying to find grounds to keep its head above the water, at least for the next few quarters.
The bank is to launch its crucial Q2 review on October 23rd and amidst looming anxiousness and significant trepidation from many, it is likely to report a pressure on its revenue front.
Among other things the management commentary on the progress of below investment grade and recovery from existing bad loans would be the key monitorable.
Calculated Foreboding for the YES Bank Q2 Review Forecast
Kotak Institutional Equities has categorized the fall in YES Bank’s outstanding loans to be of around 30% year-on-year.
It is also expected to have a worrisome revenue pressure owing to weak fee income (sharp decline) and decline in net interest income (NII) (about 12 percent YoY). The Net Interest Margin (NIM) is predicted to remain the same during the Quarter-to-Quarter period.
YES Bank’s corporate heavy loan book conflated with the ongoing pandemic and its resultant economic standstill poses a noticeable threat of asset quality deterioration for the bank.
HDFC Securities a brokerage firm has also aired caution for the upcoming reports while also articulating the possibility of Tier-1 capital of YES Bank being in sight for jeopardy in case the deterioration furthers than what is currently expected
“The recovery from stressed assets could prove to be difficult. Proposal to migrate stressed assets to a separate entity in a JV could be beneficial for the bank,” HDFC Securities stated. “The near-term challenge for investors in YES Bank would be the inability to forecast near-term slippages, the direction of credit costs and movement of NPLs,”
These predictions come in the foreground of an institutional crisis of the bank as well as a larger financial crisis, therefore many experts find the preceding problems as not being out of context and still manageable.
There are certain aspects of predictions that bring home some positive news like the recovery in deposit mobilizations etc. and the larger picture is still relatively intact minus any unnecessary surprises in the future.