40% Rise in Yes Bank’s Stock: 6 Factors Fueling the 12-Month Growth

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Amidst the recent fluctuations that made many skip a heartbeat, the stock market saw little glimpses of growing numbers. A jump of over 40% in stock returns in just one year! The market buzzed with Yes Bank’s headline numbers on 8th August 2024 after they announced quarterly results for Q1 FY2025 on 20th July 2024. 

Result? The stock closed at Rs.23.92 on Thursday and opened in green at Rs.24.17 today. Moreover, despite the Carlyle Group’s sale of its 1.35% stake in the bank, the stock recorded a one-year return of nearly 42% on Thursday. So, what caused the rise?

Yes Bank declared its Q1 FY2025 results in July 2024, and here’s what they look like

FY2025 Q1 Performance Synopsis

The net profit for Q1 FY2025 increased 46.7% year-on-year and 11.2% quarter-on-quarter . The bank also reported a net income growth of 15% and curbed its operating cost growth at 8% year-on-year. The RoA was 0.5% against the June 2023 quarter rate of 0.4%, and the bank’s net interest margins (NIMs) remained stable at 2.4% for the quarter ending June 2024. 

The bank’s quarterly results also beamed with rising net advances, which grew by 14.7% year-on-year and reached Rs.2,29,565 crore. It also made fresh disbursements of Rs.20,910 crore, of which Rs.7,440 crore were retail asset disbursements. These improvements also marked the total balance sheet growth of 14.3%. 

Yes Bank’s CASA ratio was 30.8%, compared to 29.4% in the June 2023 quarter. The gross non-performing assets (NPA) ratio was 1.7%, with net NPAs at 0.5% as of June 30. Furthermore, the Gross and Net Non-Performing Assets ratios decreased by 50 basis points and 20 basis points, respectively, to 1.7% and 0.6% as of March 31, 2024. But, is the increase in the bank’s stock returns only due to the improved quarter performance? 

Factors contributing to the Yes Bank Surge

1. Strategic Partnership:

HDFC Bank has announced a strategic partnership with EBANX, a Brazil-based global fintech company, to enhance cross-border commerce in India. EBANX, known for its expertise in payment solutions for emerging markets, will bolster the Bank’s capabilities in cross-border payment processing.

This collaboration aims to expand global commerce opportunities for merchants and customers in India. The bank also partnered with the Indian Olympic Association as the official banking partner of the Indian contingent for the Paris Olympics 2024.

2. Improved Deposits:

During FY 2023-24, deposits from branches in India increased by 22%, reaching Rs.264.22 crore, compared to Rs.216.47 crore in the previous year. Deposits from branches outside India also experienced substantial growth, doubling by 121% to over Rs.2 crore from Rs.90,87,128 in FY 2022-23.

3. Credit Rating Agency’s Upgrade:

In July, global rating agency Moody’s revised its outlook on Yes Bank from ‘stable’ to ‘positive.’ This upgrade reflects anticipated improvements in the bank’s depositor base and lending operations, which are expected to boost core profitability over the next 12–18 months. 

Moody’s upgrade followed Yes Bank’s asset quality and capitalization progress over the past 2–3 years. The bank’s enhanced ability to fulfill the central bank’s priority sector lending (PSL) requirements through new branch lending is expected to lower operating expenses related to these targets, thereby improving overall profitability.

4. Stable SME Loan Book:

Advances in the Small and Medium Enterprises (SME) segment grew by 25.6% to Rs.35,327 crore, raising the share of SME advances to 15.5% of the total portfolio, up from 14.1%. Notably, 86% of this portfolio is backed by collateral, which contributes to the stability of the loan book. This also added to the increase of 12.1% in the bank’s overall loan book in 2023-24.

5. Expanding Customer Base and Diversity:

In FY2024, the bank welcomed nearly 17 lakh new Current Account and Savings Account (CASA) customers, contributing to a 23% increase in CASA balances. In the same tenure, the company’s credit card business experienced impressive growth, with new card acquisitions rising by 46% year-on-year to 2.07 crore customers. As a result, the book size surged to Rs.5,538 crore, up 51.1%. Overall, the bank’s deposit base reached Rs.2.66 lakh crore in FY2024, 22.5% more than the previous year.

6. Leading the Digital Space:

Yes Bank continues to be a leading player in the new-age digital payments, commanding significant market shares across various platforms. The bank holds

• 34.5% market share in UPI, 
• 29.3% market share in AePS, 
• 8.6% market share in NEFT, 
• 8.9% market share in IMPS,
• 13.6% market share in NACH. 

Processing nearly every third digital payment transaction in the country, Yes Bank handles 12 to 14 billion transactions monthly. The bank leads in UPI payments with an impressive 99.8% success rate and ranks second in NEFT with a 98.7% success rate. Over 50 partners have also integrated with the bank for real-time lead mobilization during the financial year 2023-24.

Stock Performance of Yes Bank

The stock rose by approximately 12% year-to-date in 2024, delivering returns in five of the eight months this year. 

When considering the bank’s performance for the last five years, Yes Bank reached a low point before entering an extended consolidation phase, which lasted over four years—this period marked increased market participation and effective absorption of available supply. 

Later, following a significant rebound from the lows of October 2023, the stock entered a new growth phase after a brief accumulation period. During this phase, a volatility contraction pattern emerged, highlighting informed investors’ continued supply absorption and active participation. Result? The stock has recorded a cumulative increase in year-on-year price growth over the last five years. 

Conclusion

The bank’s tagline for this year’s Paris Olympics is ‘Milke Jitaayenge.’ A look at the business performance could foster a wave of confidence for investors. However, amidst the prevailing global cues, the bank’s growth could be hampered by its challenges. So, keeping an eye on market conditions and financial indicators to ensure your portfolio can ride the market volatility is a good idea. 

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