Yes Bank, a key player in the Indian private banking sector, has garnered significant attention after reporting strong earnings for the quarter ending June 2024 (Q1FY25). The bank's net profit surged by 46% year-on-year (YoY) to ₹502.43 crore, up from ₹342.5 crore in the same quarter last year. This robust growth underscores Yes Bank's ongoing recovery and operational strength, even as it navigates a challenging financial environment.

Net Interest Income (NII) and Margins

Yes Bank's Net Interest Income (NII), a critical indicator of its core earnings, grew by 12.2% YoY to ₹2,244 crore in Q1FY25, compared to ₹2,000 crore in Q1FY24. On a sequential basis, NII saw a modest increase of 4.2% from ₹2,153 crore in the previous quarter. The bank's Net Interest Margins (NIMs) remained stable at 2.4% for the June 2024 quarter, reflecting the bank's ability to maintain profitability despite a competitive lending environment.

Asset Quality and Provisions

A notable highlight of Yes Bank's Q1FY25 performance was the significant improvement in asset quality. The bank's gross non-performing assets (NPA) ratio stood at 1.7%, while net NPAs were at 0.5% as of June 30, 2024. This marks a considerable enhancement in asset quality, contributing to a more stable financial outlook. Additionally, the bank's provisions for bad loans declined sharply by 41.2% to ₹212 crore, down from ₹360 crore in the same period last year, and significantly lower than ₹471 crore in the preceding quarter.

Moody's Upgrade and Future Outlook

In a positive development, Moody’s, the global rating agency, upgraded its outlook on Yes Bank from ‘stable’ to ‘positive’, citing expectations of a gradual improvement in the bank’s depositor base and lending franchise. Moody’s emphasized the bank’s progress in asset quality and capitalisation over the past few years, which is anticipated to enhance core profitability over the next 12–18 months. However, Moody’s also cautioned that Yes Bank’s profitability may remain lower than its peers, primarily due to higher funding costs driven by increased competition for deposits.

Stock Price Performance: A Mixed Bag

Despite the strong earnings report, Yes Bank’s stock performance has been mixed. The stock has delivered a 43% increase over the past year and over 12% year-to-date in 2024. However, it faced a nearly 10% decline in August, following gains of 12% in July and 3% in June. The stock’s recent correction from higher levels reflects short-term market volatility and investor caution.

Currently trading at ₹24, the stock is approximately 27% below its 52-week high of ₹32.81, achieved on February 9, 2024. However, it has recovered significantly, increasing by 70.5% from its 52-week low of ₹14.10, recorded on October 10, 2023. Over the last four years, Yes Bank's stock has shown a 101% rise, though it has decreased by almost 74% over the last five years, reflecting a long-term volatility in its market performance.

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Technical Analysis and Market Sentiment

Technical analysts have noted that Yes Bank’s stock is currently facing resistance around the ₹27-28 level and finding support in the ₹22-23 zone. The stock recently corrected from higher levels after forming a double top, a bearish pattern on the daily time frame, and is now consolidating. The stock remains below its 20 and 50-day moving averages, indicating a slightly weaker trend.

RSI Analysis

The Relative Strength Index (RSI) is near the 45 level, suggesting that the stock is neither overbought nor oversold, but is in a neutral position. Existing investors are advised to hold their positions, while new positions could be considered around the ₹23-24 level. If the stock breaches the ₹25 level, it could see upward momentum in the coming weeks.

Long-Term Prospects

Looking at the broader picture, Yes Bank has been in a consolidation phase between the ₹29-21 levels since February 2024, reflecting short-term stability. The stock is currently sustaining above its 200-day Simple Moving Average (SMA) at the ₹23 level, a critical support zone. On the weekly timeframe, the stock has shown a trend reversal, forming higher tops and bottoms, which indicates a positive bias.

Accumulation and Price Strength

Over the past couple of years, the stock has seen strong accumulation and price rise with high volumes, suggesting increased participation from institutional investors. Analysts recommend monitoring the ₹22-20 support zone for existing long positions, with potential upside if the stock closes above ₹28 on a weekly basis, which could trigger a breakout towards the ₹33-35 zone.

Conclusion

Yes Bank’s Q1FY25 earnings highlight a solid financial recovery, with significant growth in net profit and stable margins. However, its stock performance reflects a cautious market sentiment, with technical indicators suggesting short-term consolidation. Investors are advised to monitor key support and resistance levels, with potential for upside if the stock breaks out of its current range. Moody’s positive outlook and the bank’s improving asset quality provide a favorable long-term perspective, though challenges remain in achieving profitability on par with its peers.

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