Edelweiss' report on Yes Bank
Yes Bank’s Q4FY17 core operating performance was impressive (NII >30% YoY), but high asset quality stress played spoilsport (GNPLs doubled to INR 20bn, 1.52%). While stress was largely accumulated by one account of INR 9bn (cement sector, mandated by RBI), beyond this too stress was relatively high (2 accounts of INR 9bn were sold to ARCs).
Outlook
Going ahead, the RBI’s directive on recognition & stress reporting divergence may weigh on the sector as a whole, but Yes Bank’s business strength - loan underwriting and structuring - will restrict overall loss given default. Also, we believe that progress in branch banking will aid the bank clock best-in-class return ratios and fuel re-rating. Maintain ‘BUY’.
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