YB has corrected more than 50%, but this is not the first time YB has suffered a heavy crash.
Historically, YB has been a volatile stock. In 2004 it was IPO at 45 then it reached 280 (approx.) in 2007 high before crashing to around 50 in 2008 (approx 80% crash from the peak). During this time, even though the stock was volatile, the business continued to do well.
Every time since inception, when YB faced the crisis, which seemed daunting at the time as an investor, the bank has come up stronger. I am not sure it will happen this time, but if I have to make some decision based on history, I would be more inclined to think that they will overcome- if not get stronger- the current crisis.
Here is some of the crisis
- During 2013, during the taper tantrum, the stock suffered heavy losses. The main cause was YB’s heavy reliance on wholesale funding. Today, the bank CASA deposit ratio is 35+, not the best, but more than double the level in 2013.
- YB suffered promoter tussle with late Ashok Kapoor family. The overhang lasted for a year, but eventually, the stock recovered and caught the valuation.
@Yogesh_s has done an excellent CAGR calculation above for some of the duration.
One thing different this time is Rana Kapor or uncertainty surrounding him, which nobody knows how the situation will play out.
Currently, a lot (I would say most if not all) negative are priced in- it includes all probable and possible scenario. YB has become a whipping boy for the media channel, and it is becoming a self-fulfilling prophecy in term of stock price.
Current Book value is around 110. Even if the YB declared all NPA, which RBI has pointed out in diverge, the book value might come down to 90 (approximately). However, if one listened to Rajat Monga Bloomberg interview where he explained some of the divergences, the situation is not as bad, but consider for argument sake that all divergent result in NPA. YB quarterly PAT is around 1000cr which adds around 5 to book value every quarter. I am not taking into account the next two quarterly profit in the calculation.
In a reasonable worst case the stock is trading at around PB of 2 with is not bad. In the short term, no one knows, how bad the situation can become, but over the medium term, if the business does not suffer as badly or NPA does not surge as the market is projecting, then it may turn out to be a reasonably good opportunity.
I always remind myself of a quote from a well-known investor “Market is a slave to numbers”. If the company delivers a good number, the stock will catch up with results sooner or later.
Note- I am invested, so views are biased.
