Buy Yes Bank; target of Rs 2100: Sharekhan

Sharekhan's research report on Yes Bank

With most of the key retail offerings in place, Yes Bank has successfully completed its retail product bouquet (has 13 products in the retail space). Headed by veteran staff having rich experience of top private and MNC banks, Yes Bank is well placed to tap the growth opportunity in the retail segment. Given that, at present, the bank’s market share is not yet in double digits, it can potentially grab market share from other banks. Yes Bank, with its corporate banking segment, is present at the back-end of the value chain. Further, the bank’s  growing retail presence gives it access to the  complete ecosystem, which is not only positive  for growth but also for credit quality monitoring  and early warnings about probable overheating  in segments. We believe this is an important ability, given the high chances of risk mispricing in the retail and SME segments. Though Yes Bank has been growing its retail assets at higher-than-book growth, retail assets are still at a small base and developing in a calibrated manner. With retail growth picking up, leading to salaried products and other cross-sell opportunities available, the bank is well placed to maintain its profitability and grow its business in new directions.

Outlook

At current valuations, Yes Bank is available at 2.9x FY2019E BV, which we believe is attractive as we opine most of the bad news is already discounted by the markets. Going forward, with its track record and business growth potential, we believe it can be an attractive franchise developing. We upgrade our rating to Buy with a revised price target of Rs.2,100, valuing the bank at 3.4x FY2019E  book value per share (BVPS).

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