Prabhudas Lilladher

YES Bank (Accumulate)

CMP: ₹223.65

Target: ₹250

YES Bank is a private sector bank. The bank is engaged in providing banking services, including corporate and institutional banking, financial markets, investment banking, corporate finance, branch banking, business and transaction banking and wealth management.

We downgrade YES Bank to ‘accumulate’ from ‘buy’ with target price of ₹250 based on 1.8x FY20ABV (from 2.7x multiple).

YES Bank’s outcome of board meeting has left several loose ends and prolongs uncertainty regarding the succession. It has recommended 1) establishment of committee to search & select a new MD & CEO; and 2) requisition to RBI an extension for the MD &CEO up to April 2019 at least to review the FY19 audited results and a further extension up to September 2019 (till AGM) to oversee transition; 3) appointment of Rajat Monga & Praloy Mandal as EDs as part of a long-term succession planning. However, the board has not been able to give a clear picture on the succession and further course for the bank. The timelines and uncertainty on approvals from RBI for both MD & CEO (should be difficult) and EDs will keep near-term stock performance muted.