Yes Bank share price golden cross points to a rebound after earnings

The Yes Bank share price has pulled back in the past few days as investors book profits and react to the recent quarterly results. It was trading at INR 22.65 on Tuesday, down by 6.8% from its highest level this year. This article explores whether Yes is a good bank stock to buy.

Yes Bank earnings are growing

Yes Bank share price pulled back after the company published its financial results during the weekend.

These results showed that its profit after tax, commonly known as PAT, rose by 18.3% in the second quarter of the financial year, while its operating profit rose of INR 1,296 Crs was up by 32% from the same period last year.

The company has benefited from the relatively high interest rates in India, which helped to push its net interest margin up by 2.5%. 

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Higher rates helped to offset the decline in deposits during the quarter. Yes Bank made a net profit of INR 654 Crs, a 18% increase from the same period last year. In a statement, the CEO said:

“Asset quality further strengthened during the quarter, with decline in fresh slippages and overdue balances as well as an improvement in Provision Coverage Ratio. Net Interest Margin was broadly stable, aided by lower RIDF balances and deposit rate action.”

Turnaround is working

These results demonstrate that Yes Bank’s turnaround, which started in 2020 was working. 

This turnaround started when the company came close to going bankrupt because of high bad debt in its balance sheet, which pushed its capital adequacy ratio downward sharply.

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Some of this debt was to troubled companies like Jet Airways, DHFL, and IL&FS. Therefore, the Reserve Bank of India intervened by capping withdraws at 50,000 rupees.

The RBI also pushed the country’s biggest banks to take a stake. This includes top companies like ICICI, HDFC, Axis Bank, and Kotak Mahindra. In total, it raised INR 24,000 crore.

These actions helped to stabilize the company. At the same time, the bank took investments from American private equity companies like Carlyle Group and Advent, which helped to stabilize its operations.

Its turnaround attracted other companies. Most recently, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) took a large stake in the company, becoming the largest foreign shareholder with a 24.2% stake. State Bank of India also has a 10% stake in the company, while its credit rating has jumped to AA-.

Yes Bank share price analysis 

The daily timeframe chart shows that the Yes Bank stock price bottomed at INR 16 in March and then peaked at INR 24.2 earlier this month.

It then pulled back and moved below the important support level at INR 23.28, its highest point in June.

On the positive side, Yes Bank has formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages have made a crossover.

Therefore, there is a likelihood that the stock will resume the uptrend in the coming weeks. If this happens, the next key resistance level to watch will be INR 24.22. A move above that level will point to more gains, potentially to INR 27.40, its highest level in July this year.

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