YES BANK

YES Bank is steadily regaining strength post-restructuring, with improving profitability, asset quality, and governance. Backed by SMBC’s strategic investment and RBI reforms, it is rebuilding investor confidence through a growing retail base, digital focus, and a sustainable turnaround in private banking[EasyDNNnews:PaidContentStart]

After a prolonged phase of consolidation driven by multiple factors, the banking sector has started regaining momentum as the RBI’s revival efforts begin to yield visible results. The sector has once again turned buoyant, with the Bank Nifty hitting a new all-time high of ₹58,577.50 on October 23, 2025. Over the past month, the index has delivered returns of over 4 per cent, and on a year-to-date basis, it is up by more than 13 per cent.

According to Modor Intelligence, India’s private banking market size is valued at USD 3.92 billion in 2025, and is projected to reach USD 6.26 billion by 2030, registering a CAGR of 9.83 per cent during 2025–2030. The market remains highly concentrated, dominated by a few large players that command strong capital bases and infrastructure, creating high barriers to entry for new participants. The Indian banking industry continues to be an attractive space for foreign investors, reflecting confidence in the country’s long-term growth story

A major development this year was Japan’s Sumitomo Mitsui Banking Corporation (SMBC) making its first direct equity investment in an Indian bank. In May 2025, SMBC acquired a 20 per cent stake in YES Bank, marking its largest cross-border investment and granting it board representation in India’s private banking space. The stake was purchased from SBI and a consortium of Indian banks, signalling SMBC’s formal entry into the Indian banking market.

Following this development, YES Bank has become a focal point of investor interest. Over the past month, the stock has gained 5.41 per cent, 16.42 per cent over three months, and 28.40 per cent over six months, touching a 52-week high of ₹24.30 in October 2025.

About the Company
YES Bank Limited, incorporated in 2003 and governed by the Banking Regulation Act, 1949, is a full-service private sector bank headquartered in Mumbai. The bank operates across Retail, MSME, Corporate & Wholesale, and Rural banking segments, delivering commercial banking products and digital payment services to individuals, businesses and institutions. YES Bank stands as the sixth largest private bank in India by market capitalisation.

The bank operates 1,255 branches and 235 Business Correspondent banking outlets, along with 1,331 ATMs (including CRMs and BNAs) spread across 300+ districts. YES Bank processed roughly one in every three digital payment transactions nationally during FY 2024–25. Its market share across key platforms remained robust — UPI (Payer Payment Service Provider (PSP): 33.4 per cent, Payee PSP: 56.9 per cent), Aadhaar-enabled Payment System (AePS): 39.21 per cent, NEFT: 17.3 per cent, IMPS: 10.21 per cent, National Automated Clearing House (NACH): 16.3 per cent. The bank positions itself as a digital-first institution, leveraging cloud-native platforms, open APIs, and strategic partnerships to enhance transaction banking, merchant acquiring, and retail digital solutions.

Business Segments
YES Bank operates through a diversified portfolio encompassing Retail, Corporate/Wholesale, and Treasury operations.
1. Retail Banking: Retail Banking remains a key growth driver for YES Bank, contributing significantly to both assets and liabilities. As of March 31, 2025, retail advances formed 41 per cent of total advances, reflecting the bank’s strategic shift toward granular, low-risk lending. On the liabilities side, Retail and Branch Banking deposits accounted for 59 per cent of total deposits, underlining the expanding retail franchise. The bank offers a wide range of financial products, including savings and current accounts, fixed deposits, credit cards, SME loans, and personal finance solutions. Its retail loan portfolio covers home, car, and personal loans, loans against property, and business loans. YES Bank has created focused customer engagement verticals to cater to specific segments and deepen client relationships. In FY 2024–25, the bank also launched fully digital credit card journeys, including co-branded variants, further strengthening its consumer finance presence.

2. Corporate / Wholesale Banking: YES Bank’s Corporate Banking division plays a pivotal role in balance sheet strength and fee income generation. It serves a diverse client base, including large corporations, mid-sized enterprises, government bodies, financial institutions, and multinationals. The Large Corporates group offers customised financing, cash management, and risk management solutions, following an ecosystem model that extends services to dealers and supplychain partners. The Mid-Corporate segment focuses on companies with turnover between ₹100 crore and ₹1,500 crore, targeting fast-growing sectors such as e-commerce, fintech, and agritech.

The Indian Financial Institutions (IFI) division serves NBFCs, Mutual Funds, insurance firms, and cooperative banks through transaction banking, co-lending, and direct assignment partnerships. The International Banking unit manages crossborder trade, remittances, and treasury operations, supported by the IBU at GIFT City for offshore financing. YES Bank also functions as an Agency Bank for Central and State Governments, facilitating Tax collections and digital payment services. Additionally, its MNC Banking vertical supports global corporations and GCCs in India with integrated domestic and international banking solutions.

3. Treasury: The Treasury division manages YES Bank’s liquidity, investments, and trading operations while ensuring regulatory compliance and capital efficiency. The Balance Sheet Management Group (BSMG) oversees government securities, liquid assets, and proprietary investments to optimise yields. The bank offers comprehensive market solutions across interest rates, foreign exchange (FX), and debt capital markets (DCM). As an RBI-licensed Primary Dealer, YES Bank actively trades, underwrites, and bids for government securities and Treasury Bills. Its bullion business, among the top three in India, imports gold and silver on a consignment basis for sale to dealers and jewellers, contributing significantly to fee-based income.

Key Competitors
YES Bank operates in a highly competitive private banking space dominated by large, well-capitalised players such as HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank, which together command significant market share, scale advantages, and stronger profitability metrics. HDFC Bank and ICICI Bank, with market capitalisations of around ₹15.4 lakh crore and ₹9.9 lakh crore respectively, deliver superior 3-year profit growth of over 22–26 per cent and return on equity (ROE) above 15 per cent. Axis Bank and Kotak Mahindra Bank maintain healthy ROE of 15–16 per cent and strong capital adequacy, enabling them to expand aggressively across retail and digital banking segments.

Mid-sized peers such as IndusInd Bank, Federal Bank, and IDFC First Bank are strengthening retail lending and digital presence, posting 3-year profit growth of 25–120 per cent. Smaller private banks including RBL Bank, Karur Vysya Bank, and City Union Bank operate in niche regional markets with improving asset quality but limited scale. YES Bank continues to rebuild profitability and investor confidence postrecapitalisation. The bank’s strategy of retail-led growth, digital transformation, and MSME focus aims to narrow the performance gap with larger peers while strengthening its position among mid-tier private sector banks.

Business Updates – Last Five Years
Over the last five years, YES Bank has witnessed a remarkable transformation from a near-collapse to a phase of sustained stability and growth. The 2020 crisis, triggered by years of unchecked corporate lending, weak governance, and rising NPAs from stressed borrowers like IL&FS, DHFL, and Essel Group, led to massive deposit withdrawals and severe capital erosion. The RBI intervened with a 30-day moratorium in March 2020 and initiated a reConstruction plan, with State Bank of India (SBI), HDFC Bank, ICICI Bank, and Axis Bank among key investors collectively infusing capital to stabilise the institution. Prashant Kumar, a veteran from SBI, was appointed as Managing Director & CEO to spearhead the turnaround. Under his leadership, the bank has strengthened governance, cleaned up its balance sheet, rebuilt capital buffers, and shifted focus towards retail and MSME lending, marking a clear transition from crisis to recovery.

Revenue grew from ₹20,039 crore in FY21 to surpass ₹30,000 crore for the first time in FY25, reaching ₹30,919 crore. Net profit turned around from a loss of ₹3,489 crore in FY21 to a profit of ₹2,447 crore in FY25, while the financing margin improved sharply from negative 37 per cent to negative 8 per cent, reflecting a strong operational recovery and better cost control. Other income also rose from ₹3,107 crore in FY21 to ₹6,157 crore in FY25. Notably, during the FY20 crisis, the bank had reported a steep financing margin of negative 125 per cent, translating to a negative ₹32,452 crore, along with a record net loss of ₹16,433 crore. Between 2020 and 2023, YES Bank offloaded ₹48,000 crore of stressed assets to improve its balance sheet, with recoveries and renewed capital infusion helping restore investor confidence. Financial performance improved steadily with shrinking non-performing assets (NPAs) from a crisis peak of 17.3 per cent gross NPAs in early 2020 to about 1.6 per cent by September 2025.

Capital buffers were further strengthened through strategic share sales and private placements, most notably when Japan’s SMBC emerged as YES Bank’s largest shareholder in 2025. In May 2025, SMBC agreed to acquire a combined 20 per cent stake 13.19 per cent from SBI and 6.81 per cent from other Indian banks. The RBI approved SMBC’s acquisition of up to 24.99 per cent in August 2025, followed by clearance from the Competition Commission of India in September. By mid-September, SBI had officially completed the sale of its 13.18 per cent stake, and SMBC subsequently increased its holding to 24.99 per cent after purchasing additional shares from Carlyle Group and other institutional investors. Following the transaction, SBI’s stake in YES Bank now stands at 10.78 per cent.

Financial Performance
YES Bank reported a resilient performance in Q2FY26 with a healthy year-on-year improvement across key metrics, despite a sequential moderation in profitability. The Net Interest Income (NII) stood at ₹2,301 crore, up 4.6 per cent YoY, though it declined 3 per cent QoQ due to deposit repricing and a reduction in PSL-related deposits, which offset the benefit of asset repricing. The Net Interest Margin (NIM) remained stable at 2.5 per cent, up 10 bps YoY. Non-Interest Income rose 16.9 per cent YoY to ₹1,644 crore, driven by higher fee income and improved treasury performance. Total Net Income increased 9.4 per cent YoY to ₹3,945 crore, though it was down 4.3 per cent QoQ. Supported by higher income and cost control, Operating Profit increased 32.9 per cent YoY to ₹1,296 crore.

Net Profit came in at ₹654 crore, up 18.3 per cent YoY, though down 18.3 per cent QoQ from ₹801 crore in Q1FY26. The Return on Assets (ROA) stood at 0.6 per cent, compared with 0.5 per cent in Q2FY25 and 0.8 per cent in Q1FY26, while the Return on Equity (ROE) was 5.4 per cent, up from 4.9 per cent a year earlier.

Valuation and Outlook
As of October 2025, YES Bank is valued at approximately ₹72,000 crore. The company trades at a price-to-earnings (P/E) ratio of 25.1x, which is elevated compared with the industry average of 13.3x and its own three-year median P/E of 46.8x. The price-to-book (P/B) ratio stands at 1.44x, marginally above the industry median of 1.34x. The PEG ratio is 0.79 against the industry PEG of 0.46.

Total Advances grew 6.4 per cent YoY and 3.8 per cent QoQ to ₹2,50,212 crore, led by strong traction across segments. Retail disbursements rose 19.8 per cent QoQ, while new sanctions in commercial and corporate banking nearly doubled sequentially, underscoring broad-based credit demand recovery. Total Deposits increased 6.9 per cent YoY and 7.4 per cent QoQ to ₹2,96,276 crore, driven by healthy accretion in low-cost CASA deposits. The CASA ratio improved to 33.7 per cent, compared with 32.0 per cent in Q2FY25 and 32.8 per cent in Q1FY26, supported by a 21.1 per cent QoQ rise in Current Account balances and a 17.1 per cent YoY growth in Savings Accounts. The bank opened around 2.54 lakh new retail CASA accounts during the quarter, further strengthening its liability franchise.

The Credit-to-Deposit (C/D) ratio stood at 84.5 per cent, broadly stable compared with 84.8 per cent in Q2FY25. Liquidity remained comfortable, with the average Liquidity Coverage Ratio (LCR) at 125.1 per cent for the quarter and 124.2 per cent as of September 30, 2025, well above the regulatory requirement. The Gross NPA ratio stood at 1.6 per cent, unchanged both YoY and QoQ, while the Net NPA ratio declined 20 bps YoY to 0.3 per cent. The Provision Coverage Ratio (PCR) improved to 81 per cent, up from 70 per cent in Q2FY25, indicating a stronger buffer against future credit risks. The bank’s EPS improved from ₹0.18 in Q2FY25 to ₹0.26 in Q1FY26, before moderating slightly to ₹0.21 in Q2FY26.

During FY26, YES Bank continued to strengthen its governance, credit profile, and digital leadership. Following the strategic investment by Japan’s SMBC, the bank appointed Rajeev Veeravalli Kannan and Shinichiro Nishino as NonExecutive and Non-Independent Directors, nominated by SMBC, marking a key milestone in its global partnership and governance enhancement. Reflecting the bank’s improved fundamentals, its credit rating was upgraded to AA– by CRISIL, ICRA and India Ratings. On the expansion front, YES Bank has opened 43 new branches in FY26 so far, against a target of 80 branches for the year, underscoring its focus on expanding its retail footprint. The bank also partnered with the Government of Tamil Nadu as the Critical Payment and Banking Partner for the newly launched Chennai One App, aimed at facilitating seamless digital transactions for citizens.

Building on its digital leadership and relationship banking capabilities, YES Bank continues to leverage technology to capture transactional business opportunities, deepen customer engagement, and strengthen its liability franchise. The bank remains focused on accelerating quality-led retail asset growth while maintaining prudent risk and cost controls to ensure sustainable profitability. YES Bank’s turnaround remains on track with stable margins, improved asset quality, and strong capital support from SMBC. While valuations reflect near-term recovery, sustained ROE improvement is key for re-rating. We maintain a HOLD view, with a positive bias for long-term investors on further balance sheet strengthening.

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

[EasyDNNnews:UnPaidContentEnd]