Introduction:

YES BANK is India's fourth largest private lender with pan India presence and diverse portfolio from lending activities, to fee based services like investment banking, financial markets and wealth management. It even received approval from SEBI to enter Mutual Fund business in 2018.

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Investment Rationale:    

YES BANK has been recently caught up in Corporate Governance issues like understated NPAs and selling of shares by promoters which attracted regulators (RBI’s) attention, due to which its market cap took a hit of almost 55% within a short span of 6-7 months. On proper scrutiny, RBI found no divergences in YES BANK's accounting of NPAs which makes Yes Bank the most underpriced private bank. The growth numbers of Yes Bank are staggering with spectacular, double-digit, 20-30%+ growth in revenues and net income. Although NPAs are rising but net NPAs are in comfortable range, below 1.5%, which is quite healthy.

YES BANK appointed Ravneet Gill as its MD & CEO after the forced exit of former CEO Rana Kapoor by RBI. According to YES BANK, "In his most recent role as CEO of Deutsche Bank’s businesses in India, Ravneet has ensured one of the lowest NPAs in the industry, and delivered one of the highest post tax Returns on Equity amongst all banks in India". He also has a reputation of conservative risk taking. Under his leadership Yes Bank is expected to continue its staggering double-digit, 20-30% growth with Indian Economic outlook being healthy.

On the technical front, after having seen a correction from levels of 400, the stock made a bottom at 150 odd levels, which is probably the lowest price the stock will ever see. Now if the stock takes out levels of 250, we could very well see a rally towards 286-290 the levels from where the stock started a decline.


source: Google


Recommendation:

The combination of able leadership with great management track record, spectacular growth numbers, healthy and growth oriented macro-economic environment, favorable technical, makes this underpriced bank a perfect holding.


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Comments (2)
amritbrar1805 - 02 May 19, 04:25 AM

Ravneet Gill Interview Important points:-

- the guidance provided by the new management is the most conservative with change in accounting policies according to IFRS with recoveries not being taken as part of the guidance, Rs10k cr is watchlist for NPAs and not stresed assets.

- Yes Bank to remain Corporate facing bank (can gain when other banks are shifting towards retail) with diversified revenue streams, growth coming from retail and stress coming from structured finance (high risk high return), other segments are growing at healthy double-digit rates.

- focus on making earnings and business more granular and predictable.

- Bank to ficus on liability side and can wait for growth capital to come.

- NIMs will be driven by cross-selling on corporate loans, fee based income (stil underpenetrated segment) and brining down CoF.

- to stay away from real estate & infra projects

chirag - 03 May 19, 11:01 PM

Don't you think its a good idea to wait it out for some more time before buying?

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