Shares of trade at 1.2 times FY24 book value per share, which adequately captures all the positives, said as it resumed coverage on the stock with a ‘hold’ rating and a target of Rs 16.
JM Financial said the lender’s strategy to make the loan book more granular is a step in the right direction, with retail and MSME forming 62 per cent of the book as of June 2022 against 44 per cent in FY20. The corporate book has fallen to 38 per cent against 56 per cent in FY20.
It expects growth momentum in the retail and MSME segments to continue but subdued growth in the corporate segment should keep loan growth limited to 12 per cent in FY23 and 15 per cent each in FY24 and FY25.
YES Bank is a widely tracked stock, as 26.14 per cent of the lender’s stake is with individuals owning less than Rs 2 lakh worth of shares. HNIs account for another 7.96 per cent stake in the private lender as of June 30.
JM Financial said the recent announcement of capital-raise of Rs 8,900 crore, including warrants, will help the bank strengthen its balance sheet and cater to its medium-long term growth aspirations.
Further, the transfer of Rs 48,000 crore of bad loans to an ARC will result in a cleaner balance sheet and release management bandwidth, JM Financial said.
“We expect return metrics to expand gradually and build in RoA of 0.4 per cent/0.6 per cent/0.8 per cent and RoE of 3.4 per cent/5.0 per cent/6.9 per cent in FY23E/24E/25E driven by improvement in margins, sustained momentum in fee income, and lower credit costs,” said JM Financial.
The brokerage said the transfer of Rs 48,000 crore worth of stressed assets to an ARC will reduce the on-balance sheet stress and free up management bandwidth, which can now be used to drive incremental growth. JM Financial expects future credit costs to be limited to 0.9 per cent each in FY23 and FY24 and 0.8 per cent in FY25 on account of continued strong resolution momentum and moderation in slippages.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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