Yes Bank Anticipates 48% Profit Surge in Q2 Amid Bond Controversy

Yes Bank is projected to announce a remarkable 48% year-on-year increase in net profit for the July-September quarter, reaching approximately ₹969 crore. This growth is attributed to robust loan expansion and heightened interest income. The earnings report, scheduled for release on Saturday, comes in the wake of a Supreme Court decision that deemed the bank's ₹8,415 crore AT-1 bond write-off illegal, causing a significant decline in its stock value over the past two trading sessions.

The Supreme Court's ruling, which upheld a prior Bombay High Court judgment, has raised serious concerns regarding Yes Bank's capital adequacy and future profitability. This legal backdrop has overshadowed expectations of improved core banking performance, as the bank navigates through these challenges. The stock has experienced a nearly 20% drop from its recent highs, reflecting investor apprehension regarding the bank's financial stability.

According to estimates from six brokerages, Yes Bank's net interest income (NII) is expected to grow by 22% to around ₹2,807 crore, up from ₹2,301 crore in the same quarter last year. However, there is considerable variance in profit forecasts among analysts. ICICI Securities is particularly optimistic, predicting a 64% YoY profit increase to ₹1,074 crore, while JM Financial offers a more conservative estimate of a 37.4% rise to ₹900 crore. These differing projections highlight the uncertainty surrounding operating expenses and provisioning policies.

Analysts are also focusing on the bank's loan growth and deposit base, which are expected to bolster interest income. Kotak Equities anticipates a 23% YoY growth in NII, driven by a 25% increase in loan growth, partly due to the bank's foreign currency non-resident deposit scheme. The net interest margin (NIM) is projected to be around 2.7%, indicating slight pressure from funding costs. Investors are keenly observing how effectively Yes Bank can enhance profitability through a favorable loan mix and improved cost efficiency.

Asset quality will play a crucial role in the upcoming results, with expectations of recoveries and upgrades from the retail portfolio. Analysts predict fresh slippages of approximately ₹1,200 crore, which could impact earnings. However, ICICI Securities forecasts a decrease in slippages to ₹950 crore, suggesting potential improvements in asset quality. The upcoming earnings report will be pivotal in determining the bank's financial trajectory amid ongoing challenges and investor scrutiny.