Yes Bank has done well to improve its Casa franchise, retail fees & distribution network, which have not been well appreciated. The stock is trading at 1.6x FY15E PBR for a likely 23% RoE. We see the maximum upside in Yes Bank in the event of a favourable political outcome in the upcoming elections. It remains one of the better risk-reward trades. Buy with a target price of R500.
Also see: Financial Express: India's Best Banks
Yes Bank has managed most of its business concerns over the last 15 months fairly well: (a) highly volatile liquidity conditions have had only a marginal impact on its NIM and treasury book; (b) NPLs have risen somewhat but, with a 0.4% gross NPL, this is still the best-in-class, and it has built up a floating provision of 0.4% of loans; (c) it has slowed its growth and shed risks over the last 12 months; (d) it has continued to improve its Casa franchise, with SB accounts growing from 6% of deposits to 11% and retail deposits from 37% to 42% over last seven quarters.