Hold Yes Bank: target of Rs 17: ICICI Securities

Key Investment Pillars

• Yes Bank's Q2FY27 results showed stable NII and PPOP, with a net profit of INR 10.8 bn, up 1% QoQ.
• The Supreme Court's judgement on AT1 bonds may lead to a ~270bps decline in pro forma CET 1 to 11.4%, potentially impacting the bank's growth trajectory and risk appetite.
• The bank expects NIM to be stable QoQ and rise in Q4 due to repo rate tailwinds and a receding RIDF book.
• Yes Bank is likely to benefit from the MDR on UPI, but any delta on fee would be contingent on competitive dynamics.

Thesis Validation Checklist

• Investors should watch for signals such as stable NIM, improving fee income, and a decline in RIDF book to validate the thesis.
• A strong fee income led by MDR and a resolution on the AT1 issue could be upside risks, while a slower resolution on the AT1 issue could be a downside risk.
• The bank's ability to maintain its growth trajectory and risk appetite despite the potential impact of the AT1 bond judgement will be crucial to its investment thesis.