Yes Bank shares surge nearly 30% after nil divergence report from RBI

Shares of Yes Bank Ltd gained as much as 28.96% to 218 as RBI observed no asset quality divergence for FY18. On Wednesday, in an exchange filing, Yes Bank said it has received a risk assessment report from RBI for FY18 and had nil divergence in its asset classification and provisioning from the central bank's norms.

From the beginning of this fiscal year, starting April 1, 2018, shares of Yes Bank has dropped 39%, whereas that of the benchmark index has gained 9.39% and the banking index, Bankex, gained 10.64%.

Brokerages have re-rated Yes Bank stock, mostly with a “Buy" rating with a new target price. Motilal Oswal has a has a target price of 270, SBI Cap a target price of  315 and Jefferies with 275.

JM Financial expects Yes Bank to continuously improve its retail franchise which in turn will substantially reduce concentration risks and capital consumption and diversify the fee income profile.

The brokerage also believes that Yes Bank is now in a better position to raise capital given it has received clean chit on asset quality front, though the timing of the capital raising needs to be seen.

Yes Bank had last month named Deutsche Bank India chief Ravneet Singh Gill as the new managing director and chief executive officer (CEO), succeeding Rana Kapoor at the private sector lender.

Motilal Oswal in a report said RBI’s report on divergence has removed some challenges for the new management. This will help the bank to shore up its capital base as the new CEO takes charge.

Meanwhile, Yes Bank’s profit fell to 1,001.8 crore in the quarter ended December 31, 2018, from 1,076.87 crore in the year earlier because of higher provisions on account of its exposure to Infrastructure Leasing and Financial Services Ltd ( IL&FS ) and fall in non-interest income. 

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