Buy Yes Bank; target of Rs 900: AB Money

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26 Aug, 2025 12:21

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Aditya Birla Money's report on Yes Bank

"Yes Bank reported healthy Q1FY16 results with PAT growth of 27.7% YoY to Rs 5.5 bn mainly on the back of stellar NII growth of 42.2% YoY to Rs  10.6 bn. Strong credit growth of 35% YoY and NIM improvement of 30 bps YoY (10 bps QoQ) to 3.3% supported the NII growth. Although there were some glitches in asset quality during Q1FY16, it still remains manageable with GNPA ratio of 0.46%, NNPA ratio of 0.13% and restructured book proportion of 0.7% of credit. The bank continues to strengthen its wholesale division while its retail business is yet to pick up full steam. It has been making significant investment in branch expansion and higher savings rate to strengthen its retail business which shall yield good results in terms of NIM improvement and credit growth in long term."

"In Q1FY16, the outstanding credit of bank grew by robust 35.1% YoY and 5.4% QoQ to Rs  796.7 bn which is far superior to the industry credit growth of ~10%. The growth was witnessed across all the sectors including corporate and retail credit. The credit to Large corporate grew by 33.3% YoY to Rs  540.1 bn (67.8% of total credit). The bank’s loan book is highly lopsided with corporate and SME credit constituting 90%+ of total credit while pure retail business is still an insignificant pie. Going ahead, we have modelled 24.5% CAGR in credit over FY15-17E. Majority of growth shall be contributed by corporate and SME segments. Retail credit book may take a while to gain a significant size."

Outlook and Valuations
"Yes bank has delivered strong performance across all the parameters. We believe the bank tends to be the biggest beneficiary of an easing interest rate cycle. Strong credit growth, expected NIM improvement and stable asset quality shall support PAT growth of 25.9% CAGR to Rs 31.8 bn over FY15-17E. Its superior return ratios of ~1.7% RoA and ~20% RoE to sustain going ahead. Yes Bank has high exposure to corporate sector wherein the recovery is modest than expected earlier. Considering this, we believe the asset quality risks have heightened. We reduce our target multiple from 2.4x to 2.2x FY17E ABV to arrive at a target price of Rs 900. We recommend BUY rating on the stock", says Aditya Birla Money research report.
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