YES Bank share price: 17% downside target despite 45% jump in Q4 profit; here's why

YES Bank Ltd has received a 17 per cent downside target by JM Financial, even as the private lender reported a strong 45 per cent year-on-year (YoY) jump in net profit for the March quarter. Calling Q4 as a good quarter, the brokerage said moderating recoveries are a major headwind for YES Bank in FY27.

JM Financial said a significant portion of the current earnings uplift is driven by Security Receipt (SR) recoveries, which are finite. With the recovery pool nearing exhaustion and core performance Remaining weak, the sustainability of near-1 per cent return on asset (RoA) continues to be uncertain, it said.

"We believe the stock is discounting a structurally stronger profitability profile that is yet to be demonstrated without recovery-led support. We value the bank at 0.9 time FY28 P/BV, with a target price of Rs 17, and reiterate our SELL recommendation," JM Financial said.

The fresh YES Bank target is 10.52 per cent lower than the target of Rs 19 that JM Financial suggested on January 18. 
 
The private lender on Saturday reported a 44.7 per cent YoY jump in its standalone net profit at Rs 1,068.42 crore compared with Rs 738.12 crore in the corresponding quarter of financial year. Net Interest Income (NII) for the bank witnessed a 16 per cent growth at Rs 2,637.7 crore for the fourth quarter compared with Rs 2,276.36 crore in the same period last year. 

JM Financial said the YES Bank management has guided for lower SR recoveries of Rs 800-1,000 crore in FY27, which may negatively weigh on its FY27 credit cost. 

For the quarter loan growth improved to 11.1 per cent while net interest margin (NIM) was up 5 basis points sequentially. The management has guided for double-digit loan growth (13-15 per cent range) in FY27 with retail book growth expected at 10–11 per cent and corporate at 20 per cent. NIM target is set at 3–3.5 per cent over the next 2–3 years, and core RoA incremental improvement at 20–25 bps in FY27. 

JM Financial said credit cost support is nearing exhaustion and sustainability is a key concern for YES Bank. It said fresh slippages for the lender increased to Rs 1,100 crore in Q4 from Rs 1,050 crore in Q3, while net slippages fell sharply to 0.32 per cent due to elevated recoveries. PCR stood at 81.9 per cent. 

"Credit cost rose by 25 bps QoQ to 0.28 per cent (0.95 per cent excluding SR recoveries). With FY26 SR recoveries at Rs 1,560 crore and FY27 guidance at Rs 800–1,000 crore, earnings support from SRs is expected to taper significantly," JM said.