Yes Bank Plunges as Profit Margins Face Pressure; Analysts Weigh Warning Over Rising Provisions

Yes Bank Plunges as Profit Margins Face Pressure; Analysts Weigh Warning Over Rising Provisions​

Shares of Yes Bank saw a 4% decline to ₹22.70 on Monday, despite the private lender reporting a standalone net profit of ₹1,070.99 crore for the April-June quarter of FY27. This profit represents a strong 34% year-on-year (YoY) rise from the ₹801.07 crore reported in the corresponding quarter last year.

The bank's net interest income, which measures the difference between earned and expended interest, improved by around 17.5% YoY to reach ₹2,786.46 crore during the first quarter of FY27. This is up from ₹2,371.47 crore in the preceding period.

Operational Highlights and Asset Quality Metrics​

The bank demonstrated improvements in its asset quality on a year-on-year basis. Gross Non-Performing Assets (NPA) stood at ₹3,705 crore at the end of the quarter. This figure is lower compared to the ₹4,022 crore reported in Q1 FY26 but remains higher than the ₹3,605 crore recorded in Q4 FY26.

However, sequential pressure was noted on Net NPA, which rose to ₹677 crore in the June quarter, up from March of FY26. Despite stable overall asset quality indicators, provisions increased significantly by 39% YoY, totaling ₹394 crore during the quarter ended June 30, 2026. The debt-equity ratio remained healthy at 0.66%, down from 0.69% in the prior year.

Nuvama’s View: Provisions and SME Slippages Trigger 'Reduce' Rating​

Nuvama provided a cautious outlook on Yes Bank shares, citing concerns over profitability despite improved credit growth. The brokerage noted that the profit missed estimates by 6%, primarily due to higher provisions stemming from slower Special Relationship (SR) recoveries and rising staff costs.

While the Net Interest Margin (NIM) was flat QoQ at 2.7%, Nuvama highlighted a notable uptick in slippages within the Small and Medium Enterprise (SME) segment. Management, however, maintains confidence, guiding for a 1% Return on Assets (RoA) in FY28.

"We believe court judgement on AT1 bond issue (write-off of ₹75bn) and any potential increase in stake by SMFG will be key monitorables," Nuvama stated. Consequently, the brokerage maintained a 'Reduce' call on Yes Bank with a target price of ₹22 per share, suggesting a downside potential of nearly 7% from the previous closing price.

JM Financial Upgrades Rating Amid Recovery Uncertainty​

JM Financial provided an upgrade to the stock, raising its rating on Yes Bank to 'Reduce' from 'Sell', with a target price set at ₹22 per share. This decision followed the bank’s Q1 profit beating the estimate by 2%, driven by improved core profitability and reduced tax expenses, partially offset by elevated provisions.

The domestic brokerage noted that while core operating trends continue to improve, uncertainty surrounding future SR recoveries remains a crucial factor to monitor. Management reiterated guidance for FY27F SR recovery of ₹8–10 bn (approximately ₹15.6 bn in FY26), but the firm cautioned that moderating these recoveries could potentially weigh on credit costs throughout FY27.