Motilal Oswal's report on Yes Bank
The recent capital raise of INR 49b (30% of December 2016 net worth) has added 300bp to Yes Bank’s (YES) CET1 ratio (13%). With an incremental market share of 3.5%+, aggressive roll-out of retail/SME products and strong corporate relationships, YES is expected to register loan CAGR (FY17-20) of 28% – at least 2x of system loan growth.
Outlook
YES is available at 30% discount to private banks like HDFCB, IIB and KMB. Robust BV CAGR of 23% (highest in the system), superior RoEs, strong asset quality and increased balance sheet granularity (higher share of retail loans + CASA roll out) should drive a re-rating, in our view. We expect YES to bridge the valuation gap v/s peers, and thus, reiterate Buy with a target price of INR 2,110 (3.3x FY19 BV).
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