Deutsche Bank

YES Bank (Buy)

CMP: ₹371.30

Target: ₹500

YES Bank is focusing hard on getting its liability strategy going. It opened about 100 branches recently, and raised rates on savings accounts. It has largely a floating rate loan book, and its focus on the small and medium enterprises segment should enable the bank to protect its margin in a rising interest rate environment, even with low current account, savings account. High specific and total non-performing loan coverage provide adequate cushion to absorb any potential asset quality issues. Its cost ratios, which are very low, could remain as such, as the expansion of branch banking has been slower than our earlier expectations. The bank’s return on assets continues to be among the highest in the sector.