Yes Bank shares fall 2%; Kotak reinstates coverage with a sell call

Shares of Yes Bank fell over 2 percent in intraday trade on BSE on September 16 and looked on course to extend the losses into the second consecutive session.

Brokerage firm Kotak Institutional Equities has a 'sell' call on the stock with a target price of Rs 10.

"We reinstate coverage on Yes Bank with a sell rating and fair value of Rs 10. The bank has stabilised its key business operations and is on the path to recovery. However, this recovery is unlikely to be easy as the bank has the challenging task of rebuilding confidence and deliver RoE through an asset mix where competence is untested," Kotak said.

As per the brokerage, execution risk leading to a delayed recovery in return ratios is high while valuations leave limited room for disappointment.

"At our fair value, we are valuing the bank at nearly 0.9 times September FY2022E book for RoE being on the lower side in the medium term and much of the solid earnings growth led by a low base. In what appears to be atypical of valuation, we are quite surprised at the premium valuation that Yes Bank is trading at in the market despite its recent history. A combination of factors could be driving this premium but we would want to be watchful," Kotak said.

The stock has been buzzing of late after the rating agency ICRA upgraded the ratings of various debt instruments of the private-lender on September 11.

ICRA upgraded infrastructure bonds and Basel II compliant lower tier II bonds to ‘BBB’ (Stable) from ‘BB+’ (Rating Watch).

Basel III compliant tier II bonds were upgraded to ‘BBB-’ from ‘BB’. Basel II compliant tier I bonds and upper tier-II bonds were upgraded to ‘BB+’ (Stable) from a default (D) rating, YES BANK informed the bourses in a filing.

Read more: ICRA upgrades Yes Bank's debt instruments on the improved liquidity position

Besides, Yes Bank on September 10 said it has fully repaid Reserve Bank of India (RBI) the entire Rs 50,000 crore of Special Liquidity Facility it had availed.

The chairman of the bank, Sunil Mehta, confirmed the development at the virtual Annual General Meeting of the shareholders held on September 13.

Read more: Yes Bank says no merger plans with SBI, repays entire Rs 50,000 crore to RBI

Shares of Yes Bank traded 1.79 percent lower at Rs 14.29 on BSE at 13:40 hours.

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