YES Bank shares plummeted 3.47 percent to Rs 26.17 on the BSE. The stock market is closed on Wednesday to commemorate Maharashtra Day. ICICI Securities' goal forecasts a 24% possible downside for the stock.
ICICI Securities said in its latest note that YES Bank's March quarter results were in line with its profit estimates; the private lender's loan growth was solid at 5% sequentially, and deposit growth was robust at 10% QoQ. According to ICICI Securities, YES Bank has strengthened its balance sheet, but profitability remains hampered by the unproductive bulky Rural Infrastructure Development Fund (RIDF), which accounts for 11% of total assets.
The local brokerage believes that YES Bank Ltd is making concerted efforts to increase organic priority sector lending (PSL) origination, which should reduce the incremental RIDF load and improve the yield and return on asset (RoA) trajectory in the future.
"We expect a significant increase in RoA to 1% by FY26E from 0.3% in FY24, driven by an improving NIM trajectory and low credit costs. However, the stock's valuation remains low, selling at 1.9 times/1.8 times/1.6 times FY24/FY25/FY26 ABV. Retain SELL," it stated. The firm has raised its target price for YES Bank to Rs 20 from Rs 17 before.
On Tuesday, YES Bank shares slumped 3.47 percent to Rs 26.17 on the BSE. The stock market is closed on Wednesday to commemorate Maharashtra Day. ICICI Securities' goal forecasts a 24% possible downside for the stock.
ICICI Securities isn't alone. JM Financial and Kotak Institutional Equities both recommended 'sell' on YES Bank, citing valuations. JM Financial, which has a Rs 18 target on YES Bank, stated that the bank's asset quality has improved, owing to higher recoveries, stable profitability, and solid growth.
However, it stated that current stock prices are far ahead of the potential benefits that could accrue over the medium run.
Kotak Institutional Equities also recommended a 'Sell' on the stock following the Q4 results. Kotak maintains an unchanged fair value of Rs 19 for YES Bank, valuing the bank at 1.2 times book and 13 times expected EPS.
