Yes Bank share price went parabolic: too late to buy?

The Yes Bank (NSE: YESBANK) share price did well this week, becoming one of the best performers in India this week. It soared to a high of ₹27 on Friday, its highest point since April 30th. It has jumped by almost 30% from its lowest point in June and by 35% above the year-to-date low. 

Yes Bank turnaround is continuing

Yes Bank’s stock has done well this year as investors continue cheering the company’s turnaround and the performance of the Indian recovery. Its rebound is also in sync with that of other Indian banks like ICICI, SBI, and HDFC. 

The rebound happened after the company published strong financial results that showed that its turnaround was continuing. Its net profit rose by 123% to INR 452 Crs and 95% from the previous quarter. 

This rebound happened as the net interest margin remained at 2.4% and the non-interest income rose by 56.3% from the same period in 2023. The net interest margin benefited from the relatively high interest rates by the Reserve Bank of India (RBI). 

Yes Bank has also boosted its balance sheet in the past few years. Its balance sheet moved to INR 4 lakh crors during the quarter, a 14.3% increase from the same period in 2023.

The stock has also risen after rumours said that the company was about to have substantial layoffs in a bid to reduce its substantial costs. Investors love layoffs because they help a company to be more profitable.

Turnaround is continuing

Yes Bank’s stock rebound is happening a few years after the company almost collapsed, leading to credit rating downgrades. In 2020, the Reserve Bank of India (RBI) had to intervene to ensure the company’s survival.

As part of the intervention, other large Indian banks like ICICI and HDFC had to take a stake with a three-year lock-up period, which ended last year.

The company also approved a $1.2 billion fundraising by issuing debt securities. It also agreed to overhaul its risk and governance frameworks.

As part of the turnaround strategy, the company received investments from Advent and Carlyle, two large private equity companies. This was a good step because these companies have a long-term term view.

Yes Bank also created a bad bank with over $5.81 billion in assets and transferred them to JC Flowers, an American private equity company. A bad bank is a standalone entity made up of illiquid and risky assets and is often sold at a discount. The goal is that the acquirer will work to recover these loans for a profit.

Today’s Yes Bank is fairly different from the one that existed before because it has a fairly strong loan book and has started to generate profits. It has also reduced its costs as it seeks to become a stable and more profitable company. 

The biggest risk is that it competes with juggernauts like HDFC, ICICI, Kotak Mahindra, SBI, and Axis Bank. Most Indians will always select these bigger banks, which are seen as being more stable.

Yes Bank share price forecast

YES chart by TradingView

The daily chart shows that the Yes Bank stock price has rebounded and soared to a high of ₹27, its highest point since April 30th. It has jumped above the crucial resistance level at ₹24.65, its highest point on June 3rd.

The stock has also jumped above the 50-day and 25-day Exponential Moving Averages and the 38.2% Fibonacci Retracement point. Also, the Relative Strength Index (RSI) has moved to the overbought level.

Therefore, the stock will likely continue rising as buyers target the key resistance point at ₹28.60, the 23.6% retracement point. The stop-loss of this trade will be at ₹24.65.