The America based, global financial and investment banking services company, Morgan Stanley, says that the current calendar year – 2020 – will more or less be like the previous year and the big banks will gain more market share.
However, the lenders will continue to be at a loss owing to the issue of asset quality they have been facing, according to Morgan Stanley. On Friday, the US based financial institution slashed the target price of Yes Bank saying “We remain underweight on YES Bank given the delay in capital raising and elevated asset quality stress”.
The Mutual Funds (MFs) have also cut down their stakes in Yes Bank to 5.1% in the quarter ended in December 2019, which is the lowest since March of 2013 when it was 3.8%. In the quarter ended in September 2019, MFs stakes in the bank were 9.3% and in December 2018 was 10.2%.
Today, at 12:20 pm, Yes Bank’s share traded at Rs. 45.85, down by 1.45%. Yes Bank Board Meeting is scheduled for today.
In the Yes Bank Board Meeting it is expected that the members will weigh their fund raising options.
Morgan Stanley, in the base case scenario, was assuming that Yes Bank will raise a capital of $ 2.1 billion at a price of Rs. 60 per share. The company also said “we estimated impaired loans to rise to around 30 per cent of total loans, and provision requirement of 70 per cent on that. Further we target a Common Equity Tier 1 (CET 1) ratio of around 10 per cent”.
Additionally, as Yes Bank’s share price has been falling and there has been a delay in raising the capital, Morgan Stanley has changed price expectations for the capital raising scenarios for Yes Bank, saying “we have now built in capital raising at Rs. 45 in a base case scenario, Rs. 15 in a bear case scenario and Rs. 55 in bull case scenario”.
Morgan Stanley has retained their underweight stand on RBL and IDFC banks with target prices at Rs. 240, and Rs. 24 respectively.
However, the firm changed to overweight on target price for ICICI Bank (Rs. 775), IndusInd Bank (Rs. 1,800), Kotak Mahindra Bank (Rs. 1,925), and HDFC Bank (1,700).