In July 2024, global rating agency Moody’s upgraded its outlook on Yes Bank from ‘stable’ to ‘positive.’ However, despite this optimistic outlook, Yes Bank’s share price plunged from its 52-week high of ₹32.8 on February 9, 2024, to ₹23.8 by August 29, 2024—a decline of approximately 27.44%. Moreover, Yes Bank shares have fallen another 5% over the last three trading sessions. Such volatility calls for a closer look at Yes Bank fundamental analysis.
Adding to the uncertainty, there are market rumours about the State Bank of India (SBI) potentially selling its stake in Yes Bank, where it holds a significant 24% interest as the largest shareholder. In another development, the bank recently expelled its Country Head for Financial Markets, Amit Surekha, without citing a reason, further stirring concerns.
With so much happening around Yes Bank, it is indeed a period of concern for existing investors and a dilemma for potential investors attracted by its robust Q1 FY25 earnings. What does the long-term outlook hold for Yes Bank? Let’s explore this in detail through a comprehensive Yes Bank fundamental analysis.
Company Analysis: Present-day scenario
Amit Sureka, the Country Head of Financial Markets at Yes Bank, recently stepped down on August 27, 2024 (The Economic Times). This development comes amidst rumours that SBI plans to reduce its 24% stake in Yes Bank by the end of March 2025. According to Reuters, this potential sale could enable key stakeholders like SBI, LIC, HDFC Bank, and ICICI Bank to exit their investments, following their crucial role in rescuing the bank in 2020.
In March 2020, Yes Bank faced severe financial troubles, leading the RBI to take control of its board (The Print). The RBI, seven banks and HDFC Ltd orchestrated a rescue package totalling ₹10,000 crores. SBI notably invested ₹6,050 crore, securing a 48.2% stake in the bank. Since then, Yes Bank has managed to raise ₹24,000 crore in capital, address its NPAs, and expand its operations in retail and MSME sectors. The LCR improved to 118% in December 2023 and Gross NPAs have improved from 16.8% to 2%. The bank has been steadily rebuilding its deposit base and regaining public confidence after its near collapse four years ago (Business Today).
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About the Company: Yes Bank Fundamental Analysis
Yes Bank, India’s fourth-largest private sector bank, is headquartered in Mumbai. It offers a wide range of banking products, services, and digital solutions to retail, MSME, and corporate clients. The bank operates YES SECURITIES, a wholly-owned subsidiary, to manage its brokerage and investment banking services. It has a strong presence across India, an International Banking Unit (IBU) at GIFT City, and a representative office in Abu Dhabi. Yes Bank also focuses on treasury operations to diversify its revenue streams and improve asset quality.
Scale of Business
Expanded Geographical Footprint: Increased to 1,234 branches and 219 Business Correspondent Banking Outlets across 300+ districts, with a total of 1,290 ATMs.
Branch Network Growth: Added 133 new branches since January 2023 to strengthen market presence.
Future Outlook: Yes Bank’s Strategy to Boost Profitability
Yes Bank focuses on increasing lending to small- and mid-sized companies as a key strategy. Moody’s expects its core profitability, measured by pre-provisioning profits to total assets, to improve from 0.8% in FY24 to over 1.2% in the next 12–18 months (Livemint).
The bank aims to meet the Reserve Bank of India’s priority sector lending (PSL) requirements through branch-level lending. This approach can reduce operating expenses and boost profitability. Moody’s also notes that Yes Bank’s focus on higher-yielding, but riskier, retail and SME segments could help widen its net interest margins.
CEO Prashant Kumar expects the bank’s total deposits to grow by 22% this year. He also forecasts a 23% rise in current and savings accounts (CASA). (Global Fintech Fest 2024)
Management Team
Yes Bank’s top management team includes experienced leaders like Mr R Gandhi, Mr Prashant Kumar, Mr Rajan Pental, Mr Sandeep Tewari, Ms Shweta Jalan, Mr Sunil Kaul, Mr Thekepat Keshav Kumar, Mr Atul Malik, Ms Nandita Gurjar, Ms Rekha Murthy, Mr Sadashiv Srinivas Rao, and Mr Sanjay Kumar Khemani.
Prashant Kumar, an SBI veteran and the current MD and CEO, is credited with guiding Yes Bank away from crisis. Under his leadership, the new management took decisive steps to restore trust and stabilize the bank.
Essentials & Financials: Yes Bank Fundamental Analysis
Loan Book Analysis or Credit Portfolio Overview.
We are now going to discuss the financial aspect of Yes Bank fundamental analysis. The loan book provides insight into the bank’s core business—lending.
Advances: This term refers to the total amount of loans and credit facilities that a bank has extended to its customers. It includes all types of lending, such as retail loans, corporate loans, MSME loans, agricultural loans, etc.
A higher number of advances generally indicates that the bank is actively lending, which can lead to higher interest income.
Deposits: Deposits are the total amount of money the bank holds from its customers, including savings accounts, current accounts, fixed deposits, and recurring deposits.
A growing number of deposits is positive, as it means the bank has more funds to lend, contributing to its liquidity and stability
| Loan Book | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 |
| Advances | 1,71,433.09 | 1,66,804.86 | 1,80,959.01 | 2,03,236.55 | 2,27,799.04 |
| Advances Growth(%) | -28.98 | -2.70 | +8.49 | +12.31 | +12.09 |
| Deposits | 1,05,311.17 | 1,62,845.93 | 1,97,062.58 | 2,17,382.19 | 2,66,229.53 |
| Deposits Growth (%) | -53.72 | +54.63 | +21.01 | +10.31 | +22.47 |
| Asset Quality | |||||
| Gross NPA(%) | 16.8 | 15.4 | 13.9 | 2.2 | 1.7 |
| Net NPA + Net Carrying Value of SRs(%) | 5.9 | 6.8 | 4.8 | 2.4 | 1.1 |
All figures in Rs Crores. Data Source: Yes Bank Annual Report 2023-24
Insights: YES Bank Ltd. reported a year-over-year (YoY) increase of 12.09% in its advances, surpassing its 5-year compound annual growth rate (CAGR) of 5.85%.
Asset Quality: Non-Performing Assets (NPA)
Non-performing assets (NPAs) are loans or advances where the borrower has failed to make interest or principal repayments for a specified period, typically 90 days or more. A high NPA percentage indicates a deterioration in the asset quality.
-Gross NPA helps assess the total exposure to potentially bad loans. It indicates the overall credit risk in a bank’s loan portfolio.
–Net NPA shows the effectiveness of the bank’s provisioning policy and potential impact on profitability. It reflects the actual loss that the bank may face if defaults are not recovered.
Benchmark:
–Gross NPA: A ratio below 5% is generally considered acceptable in most markets and below 2% is considered strong.
–Net NPA: A ratio below 2% is usually considered good and below 1% is considered very strong.
Insights: The bank’s Gross NPA% and Net NPA% have consistently declined over the past 4 years, reaching 1.7% and 1.1%, respectively.
Profitability Ratios
| Profitability Ratios | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 |
| Return on Equity (%) | -81.8 | -11.4 | +3.2 | +2.0 | +3.0 |
| Return on Assets (%) | -5.1 | -1.3 | +0.4 | +0.2 | +0.3 |
Profitability Ratios. Data Source: Yes Bank Annual Report 2023-24
Return on Assets (ROA)
Definition: Measures how efficiently a bank uses its assets to generate profit.
Benchmark: Look for an ROA of at least 0.8-1.0%.
Return on Equity (ROE)
Purpose: Measures the bank’s effectiveness in using shareholders’ equity to generate profits.
Benchmark: Ideally 12-15%.
Income, Cash Flows and Valuation
| FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | |
| Revenue | 38,008.12 | 23,475.39 | 22,423.52 | 26,826.76 | 32,960.89 |
| Revenue Growth % | +10.81 | -38.24 | -4.48 | +19.64 | +22.87 |
| Net Profit | -16,432.58 | -3,488.93 | 1,064.05 | 735.82 | `1,251 |
| Net Profit Growth % | -1,061.38 | - | - | -30.85 | +74.66 |
| Net Cash flow from Operating Activities | -57,721.22 | 50,124.00 | 23,597.74 | -25,816.26 | 9,644.55 |
| Valuation Ratio | |||||
| Price-to-Earnings (P/E) Ratio | -1.71 | -11.21 | 28.99 | 59.17 | 52.08 |
| Price-to-Book (P/B) Ratio | 1.30 | 1.18 | 0.91 | 1.06 | 1.58 |
All figures in Rs Crores. Data Source: Yes Bank Annual Report 2023-24
The company’s annual revenue growth of 22.87% exceeded its 3-year CAGR of 11.85%. The Price-to-Earnings (P/E) Ratio is 52.08, significantly higher than the sector average of 20.51. It is significantly overvalued.
Purpose: Measures market valuation relative to the company’s book value, helping assess if the stock is undervalued or overvalued.
Benchmark: A P/B ratio below 1 indicates the stock may be undervalued, while a ratio above 1 suggests it may be overvalued. Generally, a P/B ratio between 1 and 3 is considered acceptable.
Key Performing Indicators
| KPIs | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 | Benchmark |
| Net Interest Margin (%) | 2.2 | 2.8 | 2.3 | 2.6 | 2.4 | 3-4% |
| Capital Adequacy Ratios (%) | 8 | 17 | 17 | 18 | 15 | Minimum 9%, ideally 11-12% |
| Liquidity Coverage Ratio (%) | 40.0 | 113.9 | 114.6 | 118.5 | 116.1 | Above 100% |
| CET1 Ratio | 6.3 | 11.2 | 11.6 | 13.3 | 12.2 | 9% and above |
| Cost to Income (%) | 92.56 | 61.14 | 70.55 | 73.34 | 74.50 | Below 50-55% |
| CASA(%) | 26.6 | 26.1 | 31.1 | 30.8 | 30.9 | Above 40% |
Key Performing Indicators (KPIs). Data Source: Yes Bank Annual Report 2023-24
Net Interest Margin (NIM)
Purpose: Measures the difference between interest income generated and interest paid out relative to earning assets.
Benchmark: 3-4%.
Capital Adequacy Ratios (CAR)
Purpose: Measures the bank’s ability to absorb losses and maintain stability.
Benchmark: Minimum 9%, ideally 11-12%.
Liquidity Coverage Ratio (LCR)
Definition: Assesses the bank’s ability to cover its short-term liabilities with high-quality liquid assets.
Benchmark: The regulatory minimum is 100%, but higher values are preferable.
Common Equity Tier 1 (CET1) Ratio
Purpose: Assesses the core equity capital as a percentage of risk-weighted assets.
Benchmark: Minimum 8%, ideally 9%.
Cost-to-Income Ratio
Purpose: Measures operating expenses as a percentage of operating income, indicating operational efficiency.
Benchmark: Below 50-55%.
Current Account Savings Account (CASA) Ratio
Purpose: Measures the proportion of deposits in low-cost current and savings accounts to total deposits, indicating the cost-efficiency of funding.
Benchmark: Ideally above 40%, with a higher ratio reflecting better liquidity and cost control.
Yes Bank Fundamental Analysis- KPIs Q1FY25 (As of June 30, 2024)
–Net Interest Income (NII): Grew by 12.2% YoY to ₹2,244 crore in Q1FY25, up from ₹2,000 crore in Q1FY24. Sequentially, NII rose by 4.2% QoQ from ₹2,153 crore.
–Net Interest Margins (NIMs): Remained stable at 2.4% for the June 2024 quarter.
–Gross NPA Ratio: Stood at 1.7% as of June 30.
–Net NPA Ratio: Was 0.5% as of June 30.
–Provisions: Declined significantly by 41.2% YoY to ₹212 crore in Q1FY25, down from ₹360 crore in Q1FY24, and decreased from ₹471 crore in Q4FY24.
Shareholding Pattern
| Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Jun 2023 | Sep 2023 | Dec 2023 | Mar 2024 | Jun 2024 | |
| Promoters + | 1.42% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| FIIs + | 1.86% | 13.77% | 10.97% | 23.10% | 23.79% | 23.39% | 23.79% | 22.0% | +27.10% |
| DIIs + | 69.17% | 46.71% | 44.01% | 37.77% | 37.72% | 40.68% | 41.98% | 41.7% | +38.30% |
| Government + | 0.00% | 0.00% | 0.00% | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% |
| Public + | 27.55% | 39.52% | 45.02% | 39.10% | 38.47% | 35.90% | 34.21% | 36.3% | 34.60% |
| No. of Shareholders | 20,44,109 | 35,55,941 | 43,61,345 | 50,57,387 | 49,04,795 | 48,88,441 | 49,94,636 | 61,54,888 | 63,01,444 |
–Promoter Holding: 0% with no promoter pledging or changes.
–FII/FPI Holdings: Increased from 22.01% to 27.08% in the June 2024 quarter, rising by 5.07%.
–Mutual Funds Holdings: Remained unchanged at 0.19% in the June 2024 quarter.
-Institutional Investors Holdings: Grew from 63.74% to 65.39% in the June 2024 quarter, up by 1.65%.
Implication: The increase in institutional holding indicates growing confidence in the stock’s prospects and suggests improved investor sentiment. Higher institutional participation often reflects a positive outlook on the company’s future performance and stability.
Peer Comparison
| Company Name | Price | MCap(Cr) | TTM PE | P/B | ROE(%) | 1 Yr Perform(%) | Capital Adequacy Ratio(%) | Int. Earned(Rs.) | NIM(%) |
| Yes Bank | 23.61 | 74,003.25 | 51.33 | 1.77 | 3.04 | 40.54 | 15.40 | 27,605.86 | 1.1 |
| HDFC Bank | 1,636.90 | 1,247,216.08 | 18.30 | 2.75 | 14.03 | 3.69 | 18.80 | 283,649.02 | 3.21 |
| ICICI Bank | 1,229.20 | 865,705.34 | 18.67 | 3.21 | 17.74 | - | 16.33 | 159,515.92 | 3.61 |
| Axis Bank | 1,175.25 | 363,380.12 | 13.59 | 2.33 | 16.80 | 19.51 | 16.63 | 112,759.05 | 3.38 |
| Kotak Mahindra | 1,780.80 | 354,044.41 | 16.46 | 2.73 | 13.34 | 0.33 | 21.80 | 42,151.06 | 4.47 |
Quarterly and Annual Reports
Annual Revenue: Increased by 22.87% to ₹32,960.89 crore. This growth lags behind the sector’s average of 27.24%.
Annual Net Profit: Rose by 74.66% to ₹1,285.2 crore, outperforming the sector’s average net profit growth of 26.76%.
Stock Price: Increased by 40.54%, but underperformed the sector by 13.74% over the past year.
Quarterly Revenue: Grew by 19.86% YoY to ₹8,996.27 crore, surpassing the sector’s average YoY growth of 18.36%.
Quarterly Net Profit: Climbed by 48.84% YoY to ₹516 crore, exceeding the sector’s average YoY growth of 20.08%.
ESG achievements
-S&P Global ESG Score: Achieved the highest score of 74/100 among Indian banks as of February 16, 2024.
–CDP Rating: Earned an A- (Leadership Band) for 2023 Climate Change disclosures.
-FTSE4 Good Index: Included in the index.
-Climate Preparedness: Ranked highest by Climate Risk Horizons’ 2023 study among 34 large scheduled commercial banks.
-UNEP FI Principles for Responsible Banking: First Indian bank to be a Founding Signatory, aligning with the Paris Agreement and UNSDGs.
-YES KIRAN Scheme: Provided ₹18.63 crore in advances to SMEs for accessing solar power.
Risk Assessment
1. Operational Risk: The Bank employs a robust framework for Operational Risk Management, tailored to its size, business activities, and complexity.
2. Market Risk: Managed through comprehensive Market Risk, Investment, and Derivative Policies, supported by measures like Risk Sensitivity, Value-at-Risk, Stop Loss, Stress Testing, and Rate Scans.
3. Credit Risk: Differentiated approach:
–Wholesale Lending: Managed individually and by portfolio with exposure caps based on borrower groups, industries, and credit ratings.
–Retail Lending: Managed primarily on a portfolio basis with various credit risk models and scorecards for different customer segments, supported by stringent credit approval and post-disbursement monitoring.
Analyst Recommendations- yes bank fundamental analysis
Kotak Institutional Equities analysts have issued a ‘Sell’ recommendation for YES Bank, with a target price of ₹19.
G. Chokkalingam, Founder and MD of Equinomics Research, also holds a ‘Sell’ view on the stock.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, advises that only high-risk investors should consider this stock, while current holders may maintain their positions.
Osho Krishan, Senior Research Analyst – Technical & Derivatives at Angel One, notes that YES Bank has been trading in a range of 5-7 points recently, with no clear trend.
Technical Analysis
Osho Krishan noted that there is no clear trend for YES Bank at the moment. The near-term support is likely around ₹22, aligning with the 200-SMA (simple moving average). Currently, the stock is near the lower end of its consolidation range. While ₹22 may act as support, reaching ₹27-28 could be challenging in the near term.
Jigar S Patel, Senior Manager – Technical Research Analyst at Anand Rathi Shares and Stock Brokers, stated, “Support is at ₹22 and resistance at ₹25. A clear close above ₹25 could lead to a further rise towards ₹27.
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Bottom Line
In our Yes Bank fundamental analysis, we observed significant improvements over the past four years in its fundamentals and financials. The bank has demonstrated strong management and increased foreign and domestic institutional holdings. Key metrics such as annual revenue and profit have shown growth. However, the bank still faces challenges with low NIM, CASA, ROA, and ROE. The stock is currently overvalued based on its PE and PB ratios, and recent executive changes and rumours could negatively impact the stock price. Analysts have generally issued sell ratings and technical analysis remains bearish.
Given these factors, while Yes Bank shows potential for future performance improvement, it is not advisable for new investors to enter the stock at this time due to uncertainty about how much further the stock might decline. Monitoring the bank’s quarterly and annual results will be crucial. If management successfully enhances key metrics, Yes Bank could become a viable long-term investment option. That’s all for today’s post.
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Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over some time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
