Yesbank is going to end this year with a net profit of around 1000cr they are already at 690cr at the end of third quater.
Next financial year i am expecting it to give a net profit of around 2300 to 2500cr. The EPS will be around 0.80paisa consedering its total shares will be 3000cr and the book value will be around 14.6
Next financial year Trading at an PE of 25 and a P/b of 1.5 is not going to be difficult for yesbank .I am expecting the price to be between 18 to 20 at the end of FY 2023 on the lower side.
How will yesbank give 2500cr profit?
1.This yesr it will close at around 1000cr net profit which means it needs to add another 1500cr for it to be 2500cr .Yesbank overall cost on deposit is 4.9% i am expecting this to come down to 4.65%.
Yesbank has 2 major was to reduce this ONE is decrease deposit rate which i feel it cannot reduce the rates to much and SECOND i feel is the major factor which is increase in CASA ratio which is currently at 30% and when i compare to it to the top banks they have it above 50%.
This 25bps point reduction on its cost will add close to 450 to 500cr to its net profit. Yesbank has a COST to INCOME ratio of 71% when compared to other banks they have it close to 50% this tells they have a big cope of reducing it.
2.It is not that yesbank cannot give advances or they wont have enough money to give advances. The bigger issue is if they give advances their CEIT ratio will come down which is at 17.6%
but yesbank is going to rais 10000CR via fresh equity which will increase their shareholder equity and will give them a cusion to lend close to 50000CR keeping their CEIT at 17.5 to 18%.
Now i am expecting the rest 800cr for fresh advances.
3.Yesbank is making a killing in their RETAIL banking fees last quater it was this higest for them til date around 447cr. I feel this trend is going to continue and is going to add on to the profitability.
4.Yesbank management is positive in acheving 1% ROA with a total asset base of 3 lakh cr. By the end of next financial year i expect this to be at the same level or slightly more than this. The reason for it asset base to be same is because it is going to transferr around 50000 CR to the ARC.
Consedering their management target of 1% ROA my target of 2500cr is still on the lower side.
5.Their NIM is going to shoot up because with current advances of 176000CR (35000 to 40000cr) is NPA. So once these bad asset are going to be transferred to the ARC and their balance sheet is going to cleared they will have a higher NIM which is currently 2.4%.
6.The have a stressed asset book of 62000cr including restructure loan book as well.There is a huge scope of recovery from this stressed asset book as well, whih will directly add to NET PROFIT.
WHY am i intrested in this bank despite better opportunities in market?
I feel the downside risk in this stock is very less. So the main reason to invest in this stock is only because it downside risk is less and my focus is more on the risk than reward.
I am expecting minimum level of 18 to 20 RS by next financial year on this stock
I have given a basic overview on this stock if any of you are also tracking this stock and have some question you are welcomed.
thankyou