Sell Yes Bank; target of Rs 20: ICICI Securities

ICICI Securities's research report on Yes Bank

Yes Bank (YES) has reported Q1FY25 PAT of INR 5.0bn with stable NIM QoQ. While opex and credit costs declined QoQ, RoA was flattish due to lower other income (MTM loss). Post the warrant conversion, CET 1 stands at 13.3%. Operating parameters have been on improving trajectory though RoA remains burdened by bulky RIDF investment (~11% of total assets). The bank is making concerted efforts in organic PSL origination,

Outlook

which should ease incremental RIDF burden, aiding yields and RoAs. This, coupled with easing credit costs, could improve RoA to 0.7/1.0% by FY25/26E. However, current valuation at ~1.5x FY26E ABV seems to adequately capture the turnaround. Maintain SELL with an unchanged target price of INR 20. Key risk: Faster than expected ramp-up in organic PSL yielding steep RoA improvement.