The YES Bank share price has been in focus after the Q4 results. Two brokerage houses – Nomura and JM Financial has given their outlook on the stock. While one sees limited upside and rated the stock ‘Neutral’, the other is more bearish, indicating potential downside risks.
Now, the key question is, can Yes Bank’s fortune see a meaningful turnaround or are current earnings masking deeper challenges?
Let’s take a look at the key reasons behind the brokerage outlook and and rationale behind it –
Nomura on Yes Bank
Nomura has maintained a ‘Neutral’ stance on Yes Bank with a target price of Rs 21. This implies an upside of around 4% from current levels.
The brokerage house in its report noted that the bank delivered a strong quarter, but believes the recovery is still a work in progress.
According to the brokerage report, “Yes Bank reported strong Q4FY26 PPOP (Pre-Provision Operating Profit) of Rs 1,620 crore (+23% y-y, +31% q-q, 16% above our estimate of Rs 1,400 crore).”
Nomura in its report noted that the bank earned a bit more from its core lending business because its profit margin improved slightly to 2.75%. At the same time, it also gave out more loans, about 6% higher than the previous quarter and 11% higher compared to last year which supported overall income growth.
The bank’s profitability also improved sharply. The report highlighted that this led to a net profit of around Rs 1,070 crore, which is 45% higher than last year and also about 32% more than what the brokerage had expected. The bank also delivered a return on assets (ROA) of 0.95%
However, despite these, Nomura remains cautious about the pace of improvement. It stated, “While Yes Bank’s return profile is on a gradually improving trajectory, core-ROA build-up would take time.”
- What is driving near-term optimism?
Nomura believes some short-term factors are supporting earnings. One key factor is recoveries from stressed assets.
The brokerage believes that the bank still has around Rs 1,500 crore worth of recoveries from bad loans (SRs) left. Furthermore, if more such recoveries happen going forward, it should help keep losses from bad loans under control in the near term.
In addition to this, the bank is working on improving its fundamentals through multiple levers.
As per the report, “Yes Bank aims to improve its core-ROAs via three fundamental levers: a) reducing Rural Infrastructure Development Fund (RIDF) deposits to 5.0% vs current 6.0% of total assets by FY27; b) reducing CoF with improving CASA ratio (at 35% in 4Q26, +109bp q-q); and c) improving core-credit cost, excluding SR recoveries.”
JM Financial’s on Yes Bank
On the other hand, JM Financial has taken a more cautious stance, assigning a ‘Sell’ rating with a target price of Rs 17. This indicates a downside of about 17%.
While the brokerage also noted the strong quarter, it raised concerns about the quality and sustainability of earnings.
According to the brokerage report, “Yes Bank reported PAT growth of +45%/+12% YoY/QoQ in Q4FY26 (+13% above JMFe). This beat was led by stronger NII (+6% JMFe) and lower-than-expected opex (-4% JMFe), more than offsetting higher provisions (353% JMFe).”
Opex refers to operating expenses, which the bank managed to control.
However, JM Financial flagged that a large part of earnings was supported by recoveries. It noted that in FY26, the bank recovered around Rs 1,560 crore from old stressed loans, which made up a significant portion of its profits and supported its overall returns. However, for FY27, the management expects these recoveries to drop to about Rs 800-1,000 crore.
- Profitability concerns remain a key overhang
JM Financial also raised concerns about the bank’s long-term profitability profile. It said, “A significant portion of the current earnings uplift is driven by SR recoveries, which are finite. With the recovery pool nearing exhaustion and core performance remaining weak, the sustainability of near-1% RoA continues to be uncertain.”
JM Financial further added it believes the stock price already assumes that the bank will deliver stronger and more stable profits in the future. However, this improvement has not yet been proven without the help of one-time recoveries. Based on this view, they have valued the bank at a lower level and have given a target price of Rs 17, while maintaining a ‘Sell’ call.
- Growth improving, but still behind peers
Both brokerages agree that growth is picking up, but JM Financial believes it still lags the broader banking sector.
The report noted that the bank’s loan growth picked up, rising about 11% compared to last year and around 6% from the previous quarter. At the same time, its margins improved slightly.
Expenses were also kept under control, and the cost-to-income ratio improved compared to the previous quarter, especially after a one-time expense impact seen earlier.
Conclusion
The Yes Bank share price remains muted and the scope for upside seems limited in the near-term. One of the biggest concerns flagged by JM Financial is that a large part of earnings are from recoveries. Nomura, on the other hand, is seeing room for cautious optimism amid slight improvement in core lending business and a mild uptick in profit margin.
Disclaimer: The information provided is for general news purposes only and includes third-party brokerage ratings and target prices which do not constitute a personal recommendation or solicitation to buy, sell, or hold any security. Investing in the equity markets involves significant risk; readers are strongly advised to consult with a SEBI-registered investment advisor before making any financial decisions based on this analysis.
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