YES Bank DCF Value Analysis March 2026
The Long Road Back
YES Bank is India’s 6th largest private sector bank by total assets, incorporated in 2003 by Rana Kapoor and Ashok Kapur. The bank offers a full suite of retail, corporate, SME, and investment banking services across 1,200+ branches nationwide, with its headquarters in Mumbai.
The bank’s story is one of India’s most dramatic corporate rescues. After aggressive loan growth in the 2015–2018 period turned sour — with NPAs peaking near 14.65% — the RBI placed a withdrawal moratorium in March 2020, triggering a state-led rescue. SBI anchored a ₹10,000 crore capital infusion, acquiring ~49% equity. Seven private banks (HDFC, ICICI, Kotak, Axis, IDFC First, Federal, Bandhan) took minority stakes. YES Bank was effectively nationalized through a consortium.
Fast-forward to 2025: the landmark event was SMBC (Sumitomo Mitsui Banking Corporation) acquiring 24.2% of YES Bank for ₹13,482 crore — the largest cross-border investment in India’s banking sector. SMBC is now the single largest shareholder, with SBI holding ~10.8%. This marks the bank’s formal exit from crisis mode and entry into a new chapter under Japanese institutional backing.
The post-reconstruction financial trajectory shows steady but gradual improvement across all key parameters. The dramatic 55% profit jump in Q3 FY26 is partly driven by near-zero provisioning (₹22 crore vs ₹259 crore a year ago) — a sign of asset quality stabilization rather than purely organic profitability growth. Adjusted for this one-time provisioning benefit, core operations are improving but remain modest.
| Metric | Q3 FY25 | Q2 FY26 | Q3 FY26 | YoY Δ |
|---|---|---|---|---|
| Net Profit (₹ Cr) | 612 | 664 | 952 | +55.6% |
| Net Interest Income (₹ Cr) | 2,223 | 2,300 | 2,466 | +10.8% |
| Non-Interest Income (₹ Cr) | 1,512 | 1,248 | 1,633 | +8.0% |
| Provisions (₹ Cr) | 259 | 419 | 22 | –91.5% |
| Gross NPA (%) | 1.6% | 1.6% | 1.5% | –10 bps |
| Net NPA (%) | 0.5% | 0.3% | 0.3% | –20 bps |
| NIM (%) | 2.4% | 2.5% | 2.6% | +12 bps |
| RoA (%) | 0.6% | 0.7% | 0.9% | +30 bps |
| RoE (%) | 5.2% | 6.3% | 7.7% | +250 bps |
| Loans & Advances (₹ Cr) | 2,44,834 | 2,50,212 | 2,57,508 | +5.2% |
| Total Deposits (₹ Cr) | 2,77,224 | 2,96,276 | 2,92,484 | +5.5% |
Provision Coverage Ratio improved sharply to 83.3% from 71.2% a year ago — one of the strongest signals of balance sheet health. Slippages fell to an 8-quarter low (1.6% of advances), with retail slippages at a 7-quarter best of 3.7%. Capital Adequacy Ratio stands at a comfortable 17.2%.
For a bank in turnaround mode with unpredictable provisioning, a traditional free cash flow DCF is less reliable than a dividend discount or excess returns model. We use a modified excess return approach, anchored to normalized RoE and book value growth.
Given the stock’s current trading range of ₹18–₹20, and the ongoing turnaround trajectory, the buy range is calibrated against book value anchors and the pace of RoE improvement. Entry at lower levels provides meaningful margin of safety.
The management has guided for loan growth broadly in line with the market (~10–12%) for FY27, targeting cost-to-income below 65% and net credit costs below 0.5% of assets. The SMBC partnership opens a meaningful Japan–India business corridor for cross-border trade finance, derivatives, and institutional banking — a differentiated revenue stream unavailable to domestic peers.
| Metric | FY25A | FY26E | FY27E | FY28E |
|---|---|---|---|---|
| Net Profit (₹ Cr) | ~2,400 | ~3,200–3,500 | ~4,200–4,800 | ~5,500–6,200 |
| EPS (₹) | ~0.75 | ~1.00–1.10 | ~1.30–1.50 | ~1.70–1.95 |
| RoE (%) | ~5.1% | ~7–8% | ~9–11% | ~12–14% |
| NIM (%) | ~2.5% | ~2.6–2.7% | ~2.8–3.0% | ~3.0–3.2% |
| Loan Growth YoY | ~8% | ~8–10% | ~10–13% | ~12–15% |
| Gross NPA (Target) | ~1.7% | ~1.4–1.6% | Below 1.2% | Below 1.0% |
A re-rating to 1.8–2.2x P/ABV (mid-tier private bank multiples) requires consistent delivery against these targets over 2–3 years. The bank has earned the right to attempt it — the question is execution speed.
| Bank | NIM (%) | Gross NPA | RoA (%) | RoE (%) | P/ABV (x) | Mkt Cap (₹ Cr) |
|---|---|---|---|---|---|---|
| HDFC Bank | 3.5% | 1.3% | 1.9% | 15–17% | 2.8x | ~12,00,000 |
| ICICI Bank | 4.2% | 2.0% | 2.4% | 17–18% | 3.2x | ~9,00,000 |
| Kotak Bank | 5.0% | 1.5% | 2.5% | 14–16% | 3.1x | ~3,60,000 |
| Axis Bank | 4.0% | 1.5% | 1.8% | 15–17% | 2.0x | ~3,40,000 |
| IndusInd Bank | 4.1% | 2.1% | 1.5% | 12–13% | 1.3x | ~75,000 |
| YES Bank | 2.6% | 1.5% | 0.9% | 7.7% | 1.2x | ~59,000 |
| Private Bank Avg | ~3.8% | ~1.7% | ~2.0% | ~15% | ~2.5x | — |
YES Bank’s NIM and RoE remain significantly below the peer group average. Asset quality (Gross NPA 1.5%) is now competitive, but profitability ratios reveal how much ground remains. The discount to peers (1.2x P/ABV vs ~2.5x average) is justified currently — but is the opportunity if the RoE gap narrows.
At current prices of ₹18–₹20, the stock trades at roughly 1.2x book — modestly cheap but not deep-value given execution uncertainty. The investment case is time-sensitive: patient investors willing to hold 3–5 years for a potential RoE re-rating to 13–15% (and a 2.0–2.5x P/ABV multiple expansion) will likely be rewarded. Aggressive traders should be cautious — high retail participation and low float make this volatile. A staggered SIP approach in the ₹17–₹20 zone offers the best risk-adjusted entry.
