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ICICI Securities Report
Yes Bank Ltd. has reported in-line Q4 FY24 profit after tax of Rs 4.5 billion, with return on assets rising to 0.5%. Loan growth was healthy at 5% QoQ but deposits growth was strong at 10% QoQ. Stock of net non performing assets and net SR improved sharply to 1.1% versus 1.7% QoQ and 2.4% YoY.
The bank has strengthened balance sheet (liability, loan mix, common equity tier 1, loan-to-deposit ratio, liquidity cover ratio, etc.) though profitability remains burdened by unproductive bulky rural infrastructure development fund (~11% of assets).
Yes Bank is making concerted efforts in organic priority sector lending origination, which should ease incremental Rural Infrastructure Development Fund burden, aiding yield and return on assets trajectory.
We estimate sharp improvement in return on assets to ~1.0% by FY26E versus FY24 return on assets of 0.3%, led by improving net interest margin trajectory and benign credit costs.
Valuation, however, remains unattractive with the stock trading at ~1.9/1.8/1.6 times FY24/25E/26E adjusted book value.
Retain 'Sell' with a revised target price of Rs 20, valuing the stock at ~1.2 times FY26E adjusted book value.
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