Private sector lender YES Bank reported a strong performance for the March quarter, with net profit rising 44.7% year-on-year to Rs 1,068.42 crore. Net Interest Income (NII) also grew 16% to Rs 2,637.7 crore, reflecting improved operational momentum. However, brokerage JM Financial remains cautious, reiterating a ‘Sell’ rating on the stock with a target price of Rs 17—implying a potential downside of 17%.
While calling the March quarter a solid one, JM Financial flagged concerns over the sustainability of earnings. A significant portion of the bank’s recent profit growth has been driven by recoveries from Security Receipts (SRs), which are limited in nature. With this recovery pool nearing exhaustion, the brokerage warned that future earnings could face pressure, especially as core performance remains relatively weak.
The firm noted that the market appears to be pricing in a structurally stronger profitability profile that has yet to be proven without recovery-led support. It has valued the bank at 0.9 times FY28 price-to-book value and reduced its target price from Rs 19 earlier to Rs 17.
Looking ahead, YES Bank’s management has guided for lower SR recoveries of Rs 800–1,000 crore in FY27, compared to Rs 1,560 crore in FY26. This decline is expected to weigh on credit costs and overall profitability. JM Financial also highlighted that credit cost support from recoveries is tapering off, raising concerns about earnings stability.
On the operational front, loan growth improved to 11.1% during the quarter, while net interest margin (NIM) saw a modest sequential increase of 5 basis points. The bank expects loan growth to remain in the 13–15% range in FY27, with retail loans growing at 10–11% and corporate loans at 20%. It has also set a medium-term NIM target of 3–3.5%.
However, asset quality trends remain mixed. Fresh slippages rose to Rs 1,100 crore in Q4 from Rs 1,050 crore in Q3, though net slippages declined sharply to 0.32% due to higher recoveries. Provision Coverage Ratio (PCR) stood at 81.9%. Credit cost increased by 25 basis points sequentially to 0.28%, or 0.95% excluding SR recoveries.
JM Financial concluded that with recovery-led earnings support fading and credit costs likely to rise, sustaining profitability remains a key challenge for YES Bank in the coming years.