Hold Yes Bank; target of Rs 180: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Yes Bank

Asset quality took a hit as the bank recognised substantial slippages at Rs 3481 crore, including Rs 552 crore related to an airline exposure and Rs 529 crore on account of stressed infrastructure conglomerate. Absolute GNPA surged 53% QoQ to Rs 7883 crore in Q4FY19. Accordingly, GNPA ratio increased 112 bps QoQ to 3.22%. The bank has identified Rs 10000 crore of stress pool, which remains highlight of the quarter. Accordingly, provision surged to Rs 3662 crore in Q4FY19, including Rs 2100 crore of contingent provision in lieu of identified below rated book (still standard in books). Post contingent provision, the bank guided for credit cost of ~125 bps in FY20E. Such high provision has pushed earnings into red with loss at Rs 1507 crore.

Outlook

We revise our rating to HOLD (with a negative bias) from BUY as investors will be cautious for next 3-6 months, as upside risk to stressed book is probable. Therefore, we lower our target multiple to ~1.3x FY21E ABV and downgrade our target price to Rs 180 per share (from Rs 300 earlier). On the positive side, the bank has started recognising stress and with moderation in growth and positive change in accounting practices, RBI’s concerns may be partly addressed.

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