Yes Bank Ltd. (YBL), a new generation private sector bank, was incorporated in
November 2003 by Mr. Rana Kapoor and Mr. Ashok Kapur. However, the RBI
superseded the Board of Directors of the bank and imposed a moratorium on YBL
from March 05, 2020. Further, on March 13, 2020, the government had
approved a bailout plan for Yes Bank. Under the plan, Yes Bank had received
around `10,000cr from eight financial institutions, including `6,050cr from SBI. Currently, pre-FPO, SBI owns 48.21% in Yes Bank.
Market outlook and valuation: At the upper end of the price band, Yes Bank
demands Adj. PB of 0.85x post considering FPO. In current market, other banks
are trading at attractive valuation of FY20 net worth viz. IDFC Bank (0.9x), SBI
Bank (0.5x Core banking business), Federal Bank (0.9x). Our concern for Yes
Bank is fresh formation of bad loans that would keep provision highs and return
ratio compressed for longer time. Retail deposit is the key for any bank for lower
cost of funds; however, YBL has witnessed sizable deposit withdrawal over last 2
quarters. Rebuilding CASA and deposits is a challenging task and would take
longer time. Overall, the bank’s revival and decent RoE numbers will take longer
time. Considering above factors, we recommend NEUTRAL rating for FPO.
