But one cannot be sure of such warnings, until something materializes. Seasoned investors who had such experiences might jump ship quickly but other investors are not equipped with such understanding and cannot afford to miss good opportunities, if the warnings turn out to be misinterpretations or implications. It’s a tough call.
I would not miss good opportunities but I have also seen stocks collapsing in my negligible experience.
I find value in Yes Bank over IndusInd bank at this levels too. However, it should be beyond doubt that Yes Bank has been very aggressive in not recognizing NPAs early as compared to IndusInd Bank which is evident from huge deviation from RBI audit. Also YB has more corporate debt than IndusInd which is where the stress is. Just consider how fast the NPAs stacked up for Yes Bank from almost nil to 5000 crores. On top of it, the recent share pledge issue by promoters and RBI actions raises more doubt.
Yes bank yas well diversified loan book, please view the latest invester presentation, what is use of a bank if not willing to loan to corporates, corporate banks will be in demand going forward, retail book will always expend at a slower pace, coming to indusind despite knowing that 3000 cr loan given to IL&FS holding is irrecoverable , indusind has not recognized full NPA in the other hand, Yes bank has included 1975 cr out of 2365 cr in this quarter with 25% provisioning as per RBI guidelines. Fortunes favors the brave. Loan taken by rana kapoor is all together different matter, he has not pledged holdings, also what bank has to do with it. I see huge opportunity here and loaded good quantities at rock bottom 150 levels:grinning:
We see a lot of posts that do “finger pointing” on this thread. Essentially most of them are either rumors or unsubstantiated reports or in worst case just opinions of either analysts or users of this forum.
There will always be two types of people. One. People who love certainty and two, people who dont mind un-certainity. Type one people will NEVER invest in a company like Yes Bank. They will ALWAYS prefer HDFC Bank. So it does not add any value if type one people come to this thread and and say generic stuff one the lines of “Yes Bank management has issues” or “Yes Bank’s books are so and so”. The people who in invest in Yes Bank know these things!!! They are the type of type two!!!
Many investment books (viz. Random Walk Down The WallStreet) call such stock specific risks as “un-systematic” risk. And Yes Bank does have un-systematic risks! People who invest in Yes Bank know about the un-systematic risks of Yes Banks.
So unless you have valid proof about any allegation that you are making or any new information with proper citation, you are not helping anyone on this thread.
PS:
Personally I want to know how HDFC Bank can grow exactly at 20% qtr on qtr like clock work. Why not 22 or 18 sometimes. Why 20, at the dot? Is it possible that there is some financial trickery happening behind the scenes?
Window dressing happens in practically all the companies. My observation has been that the good companies know how to be predictable. If a firm over delivers in certain quarter, they would want to keep that in the back pocket to cover the potential downsides in subsequent quarters.
Investor presentation
Window dressing wouldnt be the correct term. I have worked and continue to work with banks in accounting and audit; Its not that difficult to reach desired level of profitability- In fact that shows a strong risk management process wherein risk is quantified and tracked.
Few examples that come to mind
1 - Sanctions: It is not difficult to sanction loans upto the desired level. For eg: If target debt to equity after taking into account borrowings constraints from particular source is achieved, bank can delay / reject some of the borderline loan sanctions. This is especially easier for a bank with high quality loan book like HDFC Bank or Housing finance companies.
2 - For Corporate lending, While sanctions are made for larger amounts, disbursements are usually calibrated in some products like CC,OD. One of the factors kept in mind for calibrated lending is target debt to equity and RoA.
3 - Provisioning - Easy to take a provision in excess of whats required and build a buffer for bad times. Beautifully done by Gruh Finance.
Another way of looking at it is if your Spread, Cost to Income, Credit cost and Leverage are within normal range, only variable you need to keep track of is Loan book Growth. Not that difficult to manage that.
In case a bank feels, that loan book i.e. Asset side growth is going to be faster than Liability side growth, and if D/E is going into uncomfortable territory, it can raise capital well in advance, like the recent QIP done by HDFC Bank.
Agree with what you’re saying fully.
I’m not invested in HDFC Bank but quarter after quarter on the spot 20% growth made me think “what exactly is going on…this is a picture perfect bank with nothing going against it even when there are bigger banks and smaller banks none of which deliver on the spot 20% growth every quarter!”
Well maybe we can find something on this in the thread on HDFC.
But the fact remains, HDFC today is a consensus trade where all good things are reflected in the enormous valuation multiple it’s available at. Unless you’ve a long enough horizon over which absolutely nothing goes bad with the bank, you won’t make much money on it.
In contrast, Yes Bank has a lot of uncertainties still pending even after the appointment of Ravneet Gill:
Deutsche Bank, from where Ravneet Gill comes, is itself not a problem free org at the global level with heavy fines it faced recently and top mgmt churn. It’s India operations are small:
My guess is Yes Bank has not appointed Mr Gill for his operational performance but for the fact that he has been with the Bank for 20+ years, would bring in his own roster of corporate relationships to the YB stable & has risen to the top with DB India facing no compliance issues.
Apart from this, RBI divergence report, promoter feud, capital raising plans, CEO strategy, Rana Kapoor’s role as promoter, Balance Sheet clean up are all uncertain events in the future each of which can make or break the price again to new highs or new lows.
So investors looking for a smooth ride better avoid getting in at this juncture.
My sense is these events, as and when they get resolved, will bring out a stronger and better governed bank which will compete directly with the bigger private banks…
Only those who can tolerate uncertainty and the accompanying volatility during this journey are Yes Bank boarders.
@Yogesh_s The below development looks to be a very positive development. Please share ur views. Thanks!
Regarding HDFC bank, as a banker myself I think it is completely possible to target a specific growth rate and an EOP asset target. Specially true for HDFC bank, when your cost of fund is so low that you can easily pick the best deals available in market.
HDFC can offer rates which even a few foreign banks (HSBC) and only SBI can afford. At times, their term loan ROIs are cheaper than other banks’ working capital facilities.
The first of the resignations has come in : Senior group president Pralay Mondal resigns from Yes Bank
Mondal will serve notice till March 31
I guess these are good to get out of the way now that the new CEO can hit the ground running when he starts.
1) There is lot of uncertainty around Yes Bank. With exit of Rana Kapoor and ratings downgrade, the credit cost set to rise which will effect profitably.
However bank remains confident of containing credit cost at 80bps (which includes the impact of RBI divergences).
2) What if there are more NPA's which were not declared under Rana Kapoor?
The new CEO expected to declare them. RBI divergence report shall be a big trigger as well.
As per ICRA “Updates on divergence, raising equity capital and the revised strategy of the bank would be the key monitorables from a rating perspective.”
3) Divergence is the difference between the Reserve Bank of India’s (RBI) inspection report and the lender’s own assessment. In October 2017, Yes Bank had reported a divergence in gross bad loans of Rs 6,355 crore for the financial year (Share price went down from 375 to 299 - 20% correction). There could be another divergence of about Rs 1,500 crore, market sources believe. In that case share shall correct further (Another 20-30% ???).
Overall there is a lot of uncertainty and uncertainty find expression in Volatility. So stock will be volatile but I think it’s worth buying around 150-160 levels. Risk reward looks favorable.
I have been hearing this and believing this ever since I started looking into markets in 2010…only to see Hdfc bank grow and grow…and my other picks in financials either remain stagnant or degrow over long term…if something bad happens to Hdfc it will be an eye opener for the entire world, that is if at all that happens…i wonder what would those lucky people doing who are holding Hdfc bank since a decade or two…are they selling for the fear of it being after all a bank and financial institution is prone to huge risks or they have full confidence in the integrity of this institution for more decades…Yes bank being a good but at 150 odd I have no clue…but looks like being a normal retail investor of india with limited insights and resources I might take the plunge if it hits 150 this time…
Yes bank has exposure in DHFL ~ 15% of its Net worth…
But How long they can sustain ?
Any idea about the today’s call details
what is the source of this ?
Can someone share summary of the article. Its only for premium users
