Yes Bank recovering from its QIP fiasco

Yes bank has been a darling with investors when it comes to taking exposure in the growing private banking space in India. Lately, the stock has been in the news for all wrong reasons and the stock has fallen from its record highs by almost 15 per cent.

However, the stock has shown some signs of recovery post its failed QIP fiasco. Deutsch Bank has come up with a research report on Yes bank and following are the highlights of the report: -

• Current Tier 1 capital of 10.3% with RoEs at 20%+ is comfortable for the next 12-18 months.
• The core business is in a sweet spot, well-positioned for growth (25 %+), NIMs (expect 15bps improvement) and with a net earnings CAGR of 28%.
• After the recent correction, the valuations are comfortable at 2.5x FY18E P/BV and 12x FY18E P/E, given its strong growth, high RoEs and improvement in the retail franchise, even as the capital raising is delayed somewhat.
• Corporate growth is expected to remain steady at 25%. Its pricing power is due to weaker competition, resulting in better NIMs and fees.
• Strong retail growth from a very low base will enable the bank to grow at >25% for the next three years; adequate investment was made in the last few years in branches and human resource, etc.
• NIM improvement due to better CASA %, declining SA rates, internal PSL generation, and lower wholesale rates, etc.
• Asset quality is likely to remain stable.