YES Bank stock worth buying? Nomura shares key trigger, price target

Nomura India in its latest note on YES Bank said the private lender's returns profile is on a gradual improvement trajectory, which is encouraging. The brokerage said the bank's Q2 operational performance was steady and asset quality was stable. It however feels the prevailing market price is factoring in most positives.  

Nomura India said YES Bank may deliver return on asset (RoA) of 0.5 per cent in FY25 and 0.8 per cent in FY26. This RoA profile continues to be well-below peers, the foreign brokerage said while noting that the stock valuations at 1.3 times FY26 book value per share adequately reflect the positives. 

The broking firm maintained its 'Neutral' stance on the YES Bank stock with a target price of Rs 17 per share. On Wednesday, the bank stock was trading 1.49 per cent higher at Rs 21.06. The banking stock has fallen 7 per cent in 2024 so far. 

For the September quarter, YES Bank reported PAT of Rs 550 crore, up 146 per cent YoY, led by lower credit cost, lower opex growth and a lower tax rate. Deposit growth was strong at 18 per cent, while the CASA ratio also picked up 120 basis sequentially to 32 per cent. 

The management highlighted that it is seeing some stress in the unsecured retail segment, and hence, near-term growth should be muted in this segment, with a greater focus on collections. 

Nomura India said the focus remains on reducing net interest margin (NIM) drag on account of lower-yielding Rural Infrastructure Development Fund (RIDF) deposits. The YES Bank management said it remained focused on ensuring PSL compliance, driven by acceleration on organic sourcing in the PSL sub-categories. 

"RIDF deposits, made in lieu of PSL shortfalls, currently form 11 per cent of overall assets and are expected drop to 5 per cent of overall assets by Mar-27E, as per management. Given that these deposits are lower-yielding, we believe a gradually declining trend here should aid margins going forward," Nomura India said.