Target: ₹17
CMP: ₹20.78
We met Yes Bank’s CFO Niranjan Banodkar, for business updates and assessing whether SMBC (Sumitomo Mitsui Banking Corp)’s entry as a majority shareholder will expedite the long-awaited turnaround.
Post RBI restructuring, Yes Bank pivoted from a corporate heavy portfolio (68-70 per cent) toward retail (49 per cent) and Commercial Banking/SME (25 per cent), to avoid lumpy corporate asset-quality shock and driving better RaRoC; however, it has met with limited success, with retail still in loss. Its retail portfolio has been shrinking for the past few quarters, as asset-quality concerns have surfaced (GNPA inched up, to 2.3 per cent in Q1FY26), mainly led by its overdependence on DSAs for sourcing and a relatively risky portfolio.
While SBI’s entry into Yes Bank has helped the bank stabilise its deposit base, we believe SMBC’s entry could potentially lead to one more reset on the asset front (mainly retail/SME), apart from access to sustained source of capital, enhanced governance, management rejig and possibly some portfolio clean-up.
Despite our estimate revisions, we retain SELL on the bank and our TP of ₹17, given rich valuations (1.2x FY27E ABV) relative to core profitability. However, a potential leadership transition, coupled with strategic influence of SMBC, will be a key monitorable as it could grant another opportunity to Yes Bank for attempting a long-awaited turnaround.