Many have mentioned that UBS have a personal revenge (probably including myself) right from when Yes Bank was around Rs.400. Seems only UBS have been right so far which increased my respect in them. In banking, a conservative Bank is much better than an aggressive bank as bankruptcy is a real possibility. Yes Bank is probabaly the most aggressive bank in India.
If they are Aggressive in lending and aggressive in recovery too ,in that case both will balance out in case of defaults/ improper underwriting etc.
Isn’t it ?
Are they aggressive in recovery?
When did they classify loan as NPA and made provisions “aggressively”?
One cannot be aggressive in recovery as there are only certain things a bank can lawfully do. But it’s beyond doubt that they’re aggressive in NPA recognition as it is a double whammy for us shareholders as we do not know how bad the books are!
In case anybody missed this. Made me think.
You are just endorsing a rating agency UBS based on price target predicted and achieved during this carnage. Have you read out the report which was published by UBS for 150 target and rationale behind it, i read the report ans could not relate much. Do you feel yes bank could have gone down to 150 if RBI had not removed Rana Kapoor, NEVER. targets from morgen stenly were more than 500. Lets compare indusind and yes bank this quarter results. Indusind bank has not declared ILFS holding exposure as NPA wheres YES has fully declared as NPA and took 25% provisioning as well as per RBI guidelines. A bank growing at 54%, P/B 1.8, GNPA 2.2 including IL&FS is trading at pathatic markwt cap of 50000 cr, wait for 3 years to see valuation surpassing 200000 cr. Indusind has lot if hidden NPA and adament not to declare it, ravneet gill led bank will do wonders in coming years.
Mr. Hemindra Hazari has been consistently warning of ills in the Private Sector Banks since last several years, if I recall, at least, from 2010/11 onwards . Unfortunately market has not been discounting these fears and it has led to a lot of exuberance in almost all the private banks. The banker-borrower-broker-ministry nexus is rampant in India and almost all the companies seem to be involved in this. Better to be cautious and lean towards zero debt companies for the next few years.
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.
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.
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:
- DB India has not grown well under Mr. Gill. (Loan book CAGR of 12% to 39K crore and deposits CAGR of 18% to 47K crore over FY13-18.
- NII growth has been meagre too at 5% over his tenure as CEO.
- PAT was 900cr in FY18, (~1/4th that of Yes Bank) & has fallen for last 2 straight years.
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.