Yes Bank remains top pick as no meaningful exposure to 12 NPA accounts: Edelweiss

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26 Aug, 2025 12:21

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With maintaining a buy call and target price of Rs 1,832 on Yes Bank, Edelweiss said amid current asset quality hullaballo, the bank's strengths - loan underwriting & structuring and longer term business momentum (retailisation) - would aid it clock best-in-class return ratios.

The stock gained nearly 2 percent intraday Friday as it remained Edelweiss' top pick.

At current market price, the stock trades at 2.3x FY19 P/ABV, attractive for a bank that has delivered more than 30 percent earnings CAGR in past 5 years and estimated to clock more than 30 percent over FY17-19, it feels.

The bank has assessed the list of 12 accounts, which is to be referred under Insolvency & Bankruptcy Code, and suggested that it has limited exposure to these accounts.

"Our assessment of charge documents validates the bank's claims," Edelweiss said, adding encouragingly , factoring in all these, the bank maintained its credit cost guidance of 50-70 basis points for FY18.

Overall assets stress remains low at lower than 3 percent, but the bank had divergence with RBI on gross non-performing loans recognition. Divergence was pertained to FY16, but with remedial actions during FY17 there were several reductions/exits/partial sale to ARCs/improvement in accounts conduct. Thus, currently there is no divergence.

"Henceforth, while divergence could persist leading to volatile headline asset quality, the bank’s superior loan structuring skills will restrict overall LGD (loss given default) and be within the overall credit cost guidance," the brokerage house said.

In FY17, the bank had credit cost of 53bps (even post RBI's divergence).

At 15:14 hours IST, the stock price was quoting at Rs 1,461.55, up Rs 24.00, or 1.67 percent on the BSE.