Brokerage cuts Yes Bank Target to Rs 1
Brokerage cuts Yes Bank: The International brokerage firm JP Morgan S Bank has lowered the share target price to Rs 1 (previously Rs.55). However, the rating continued to underweight.
The stock rallied 25.77 percent to nearer at Rs 36.85. After a Bloomberg report, the government asked State Bank of India (SBI) to buy private lenders by forming a consortium of banks and raising stakes.
However, Yes Bank rejected such action and did not obtain any such notifications from Reserve Bank of India. “The new capital would likely come at the current share price at a steep discount, as forced bailout investors would like a significant reduction for equity holders.”
The brokers think forced bailout investors would most likely want the bank to take the risks of the stress book and the loss of deposits to account at close to zero value. For the quarter of October to December 2019, the bank did not yet announce its earnings. Meanwhile, the firm also believes that a small equity value will be recapitalized.
However, it remained to seen additional Tier- 1 (AT1), would be called for at the bank for dilution. As such a move may have consequences for future similar private bank issuance, it said.
Jp Morgan said “Conservatively terms, Yes bank’s stressed pool (Rs 45.000-50.000 crore). We estimate the net worth Rs 27,000 crore of the bank’s stress book to have buffered most of the losses. But capital still needed to recapitalize it, that could be 2.5-3 billion dollars in our if AT1 not converted.”
Forced bailout investors particularly if part of the government probably needs equity to be significantly reduced. It added that the book value per share was almost completely erosion.
SBI and LIC are likely to buy 24.5% of Yes Bank shares, as the government and RBI are likely to be unsure of the bank’s ability to acquire a capital investor on March 14, according to CNBC-TV18 reports. Meanwhile, the new MD going to appoint for Yes Bank to control the Board.
Besides, Yes Bank trading with a loss of 20.55 points reached 16.25 INR with 55.84% down in NSE. Whereas, in BSE it trading with a loss of 20.75 points reached 16.10 INR with 56.31% down.