YES Bank shares: ICICI Securities revises upward stock price target, sees RoA improvement ahead

ICICI Securities in its latest note said YES Bank's March quarter results were in-line with its expectations on profit front; the private lender's loan growth was healthy at 5 per cent sequentially and deposit growth was strong at 10 per cent QoQ. YES Bank, ICICI Securities said, has strengthened its balance sheet, though profitability remains burdened by unproductive bulky Rural Infrastructure Development Fund (RIDF), which accounts for 11 per cent of assets.

The domestic brokerage felt that YES Bank Ltd is making concerted efforts in organic priority sector lending (PSL) origination, which should ease incremental RIDF burden, aiding yield and return on asset (RoA) trajectory going ahead.

"We estimate a sharp improvement in RoA to 1 per cent by FY26E against FY24 RoA of 0.3 per cent, led by improving NIM trajectory and benign credit costs. Valuation, however, remains unattractive with the stock trading at 1.9 times/1.8 times/1.6 times FY24/FY25/FY26 ABV. Retain SELL," it said.

The brokerage has upped its target price for YES Bank to Rs 20 from Rs 17 earlier.

On Tuesday, YES Bank shares fell 3.47 per cent to settle at Rs 26.17 on BSE. The stock market is closed on Wednesday on account of Maharashtra Day. ICICI Securities target suggests 24 per cent potential downside for the stock.

ICICI Securities is not alone. JM Financial and Kotak Institutional Equities also suggested a 'sell' on YES Bank, citing valuations.

JM Financial, which has a target of Rs 18 on YES Bank, said the bank saw improvement in asset quality, supported by higher recoveries, steady margins and strong growth.

But it said the current stock valuations are well ahead of the potential positives that could accrue over the medium-term

Kotak Institutional Equities also suggested a ‘Sell’ on the stock post Q4 results. Kotak has an unchanged fair value of Rs 19 for YES Bank, as it values the bank at 1.2 times book and 13 times estimated EPS.

"The bank guides for credit cost at