# Yes Bank: Phoenix Rising or Permanent Value Trap?

> Once India's fastest-growing bank, then a near-death experience. Four years post-rescue — is Yes Bank finally turning the corner?

**Companies**: Yes Bank
**Sectors**: Lending & Banking
**Published**: 2026-03-27
**Last Updated**: 2026-03-30
**Source**: https://thesisloop.ai/thesis/26c92147-98de-4565-b9b2-f1948db2f3b3

## Score Overview

| Company | Management | Business Model | Future Growth | Risk |
|---------|-----------|---------------|--------------|------|
| Yes Bank | 81/100 | 73/100 | 73/100 | 52/100 |

## Yes Bank (BSE:532648)

**Sector**: Lending & Banking | **Industry**: Private Sector Bank

### Management Credibility

- **[CATALYST] Credit Growth Cycle Acceleration** (NEUTRAL, IN_PROGRESS): The bank has delivered on its growth targets for these segments, with SME advances growing at 23.8% Y-o-Y and Mid Corporate advances growing at 25.0% Y-o-Y as of Q1FY25. (1 met, 1 exceeded, 1 in progress across 3 tracked commitments)
  > Targeting 25%+ CAGR and further intensifying Cross-Sell including Retail Products
- **[CATALYST] Expected Credit Loss Framework Transition** (NEUTRAL): Management does not expect a material hit to results upon the transition to Expected Credit Loss (ECL) accounting. — target: No material hit
  > We don't expect a material hit to the opening results as on the date of transition, just from a stage 1, stage 2, stage 3 on the loan book.
- **[CATALYST] RBI Monetary Policy and Rate Cuts** (NEUTRAL): The Bank expects the overall Cost of Deposits to decrease by approximately 20 basis points due to Savings Account rate cuts. — target: lower by approximately 20 basis points (+1 more commitment)
  > So we are expecting overall Cost of Deposits to be lower by approximately 20 basis points.
- **[METRIC] Credit Deposit CD Ratio (METRIC)** (POSITIVE, MET): The CD ratio stood at 86.6%, well within the guided comfort range of 85-90%. (5 met across 5 tracked commitments)
  > So, I think this trajectory or range between 85% to 90%... I think this range of 85% to 90% is quite comfortable for us.
- **[METRIC] Fee Income Percentage of Total Income** (NEUTRAL): The bank expects the momentum in Fee Income to continue, targeting a growth trend of 20% plus. — target: > 20%
  > At least the underlying trends on core fees continue to hold good. Yes, of course, there were some pulls and pushes that played out during the quarter, but we are confident that the fee trend should hold up about 20% plus.
- **[METRIC] Net Interest Margin** (POSITIVE, IN_PROGRESS): The bank reduced RIDF and mandated deposits from 11% to 8.7% of total assets in FY25, remaining on track for the FY27 target. (2 in progress across 2 tracked commitments)
  > Comprehensive strategy adopted & currently under execution to reduce the quantum of RIDF balances over 2-3 years timeframe
- **[METRIC] Return on Equity ROE** (POSITIVE, EXCEEDED): ROA doubled year-on-year to 0.6% for FY25, with a Q4 exit rate of 0.7%, showing progress toward the 1% target. (2 in progress, 1 met across 3 tracked commitments)
  > In fact, as we look at our ROA journey of 1% over the next three years, the swing or the delta that will come in is actually going to come materially from the Retail business.
- **[METRIC] Gross NPA and Slippage Ratio (METRIC)** (POSITIVE, EXCEEDED): The bank surpassed its recovery target for the fiscal year, achieving nearly INR 6,000 crores. (3 exceeded, 2 met across 5 tracked commitments)
  > we are quite confident that FY ‘25 also we will see a similar trend, but definitely more than INR 5,000 crores.
- **[PRINCIPLE] CASA Franchise as Structural Moat (PRINCIPLE)** (NEUTRAL): The bank is targeting a specific customer acquisition run-rate for its retail franchise. — target: more than 1.0 million new CASA customers per annum
  > A ‘Preferred Retail Franchise’ with strong Customer Acquisition run-rate of more than 1.0 million new CASA customers per annum
- **[PRINCIPLE] Technology and Digital Banking Leadership** (POSITIVE, MET): The bank reported operating expenses as a percentage of assets at 2.5% for Q1FY25, meeting the target of staying below 2.6%. (1 met across 1 tracked commitment)
  > Credit Card Co-origination with Savings Account expected to Go-live in April’24
- **[PRINCIPLE] Management Quality and Governance Standards** (POSITIVE, MET): The conversion of warrants by Private Equity investors (Carlyle and Advent) resulted in a 100 bps accretion to the CET-1 ratio during Q1FY25, doubling the initial expectation. (2 exceeded, 3 met across 5 tracked commitments)
  > 21% women participation* in the Bank’s workforce with a target to achieve 25% gender diversity by FY 2024-25
- **[PRINCIPLE] Provisioning Coverage and Counter-Cyclical Buffers (PRINCIPLE)** (POSITIVE, EXCEEDED): The bank has already surpassed the 70% PCR target when including technical write-offs, reaching 80.1%. (5 exceeded across 5 tracked commitments)
  > The redemption that will come through in Fiscal ‘25, we will make sure that, that balance becomes zero by the end of Fiscal ‘25, right. That is the first priority.
- **[PRINCIPLE] Retail vs Corporate Loan Mix (PRINCIPLE)** (POSITIVE, MET): Both SME and Mid-Corporate segments grew at 26% Y-o-Y, hitting the upper end of the 'mid-20s' guidance. (2 exceeded, 3 met across 5 tracked commitments)
  > we expect that within Advances, the Ratio of Retail + SME Segment Advances to Wholesale Segment Advances (Mid-Corporate and Large-Corporate) would remain at the similar level of 62:38 from here on over the near-to-medium term.
- **[TREND] AI and GenAI Adoption in Banking** (NEUTRAL): The bank is working on implementing new technologies, specifically Artificial Intelligence and Generative AI, to reduce costs and improve efficiency.
  > I think in the future, there is a lot of opportunities as I spoke, to implement the new technologies, both on artificial intelligence and gen AI, okay, in terms of reducing costs and bringing efficiency.
- **[TREND] Deposit Mobilization Competition** (NEUTRAL): Management expects the Cost of Deposits to further improve following recent rate cuts. — target: further improve (+1 more commitment)
  > Just to call out, our Cost of Deposits has remained largely around 6% over the last six consecutive quarters, and with our recent rate cuts, we expect it to further improve going forward.
- **[TREND] Surplus Liquidity and Rate Transmission** (POSITIVE, IN_PROGRESS): Significant reduction in RIDF balances occurred in Q3, with a reduction of over INR 8,000 crores in the last week of December alone. (1 in progress across 1 tracked commitment)
  > it marked the beginning of meaningful reduction in our outstanding RIDF deposit balances which reduced by over INR 8,000 crores largely towards last week of December ‘24. These RIDF deposits now stand at around 8% of our Total Assets
- **[TREND] Unsecured Lending Stress Buildup** (NEUTRAL, IN_PROGRESS): Management confirmed that unsecured stress (specifically in personal loans and credit cards) is expected to remain range-bound for the next two quarters (until March '25). (1 in progress, 1 met across 2 tracked commitments)
  > So unsecured will remain at that level for the next 1 or 2 quarters.
- The exercise of warrants by Carlyle and Advent affiliates resulted in a significantly higher boost to the CET1 ratio than previously guided. (1 exceeded, 4 met across 5 tracked commitments) (POSITIVE, MET)
  > Target to impact over 75,000 individuals by 2026

### Business Model

- **[METRIC] Fee Income Percentage of Total Income (METRIC)** (POSITIVE, Change: EXPANDING): Non-interest income as a percentage of average assets has meaningfully increased from 1.1% in FY23 to 1.4% in FY25, driven by granular fee income streams. (5 expanding across 1 engine)
  > Non Interest Income Q3FY26 1,633; Y-o-Y 8.0%; Total Income 4,098
- **[METRIC] Net Interest Margin (METRIC)** (POSITIVE, Change: EXPANDING): Net Interest Income (NII) grew 10.5% for the full year FY25, reaching INR 8,944 crores. The Net Interest Margin (NIM) showed a sequential uptick to 2.5% in Q4, supported by lower costs of deposits and reduced high-cost borrowings. (5 expanding across 1 engine)
  > Net Interest Income Q3FY26 2,466; Y-o-Y 10.9%; NIM 2.6%
- **[METRIC] Return on Equity ROE** (POSITIVE, Change: EXPANDING): RoA reached a milestone of 1.0% in Q3FY26, a significant jump from 0.6% in the same quarter last year, reflecting the success of the turnaround strategy. (1 expanding)
  > Return on Assets (RoA) Q3FY26 1.0% v/s FY25 0.6%
- **[PRINCIPLE] CASA Franchise as Structural Moat (PRINCIPLE)** (POSITIVE, Change: EXPANDING): The CASA ratio improved to 33.7%, up from 32.0% a year ago, indicating a shift towards lower-cost deposits despite intense industry competition. (2 expanding)
  > CASA Ratio 33.7% v/s. 32.0% Q2FY25
- **[PRINCIPLE] Technology and Digital Banking Leadership (PRINCIPLE)** (POSITIVE, Change: EXPANDING): The technological moat is being augmented by SMBC's global governance and credit rating standards. While the bank maintains its digital leadership, the partnership aims to unlock new business opportunities through cross-border expertise and access to global corporate clients. (3 expanding, 1 stable)
  > Market Leadership – YBL processes ~1 in 3 Digital Payment transaction in India; UPI Payments #1 Payee PSP (55.2% market share)
- **[PRINCIPLE] Management Quality and Governance Standards** (POSITIVE, Change: EXPANDING): The bank's ownership structure is shifting from a rescue-led consortium to a strategic global partnership with Sumitomo Mitsui Banking Corporation (SMBC) acquiring a 20% stake. This transition from the 2020 Reconstruction Scheme to a long-term strategic investor is expected to drive the next phase of profitability and value creation. (1 expanding)
  > SMBC to acquire 20% stake from SBI and other Investor Banks; SMBC to become Bank’s largest shareholder... The transaction is a significant milestone to drive YES Bank’s next phase of growth, profitability and value creation, leveraging SMBC’s global expertise
- **[PRINCIPLE] Provisioning Coverage and Counter-Cyclical Buffers (PRINCIPLE)** (POSITIVE, Change: EXPANDING): The bank further strengthened its financial safety net, with the Provision Coverage Ratio (PCR) increasing to 79.7% (excluding technical write-offs) and 87.6% including them, marking a significant improvement from the previous year. (5 expanding)
  > PCR at 83.3% in Q3FY26 v/s 81.0% in Q2FY26 and 71.2% in Q3FY25
- **[PRINCIPLE] Retail vs Corporate Loan Mix (PRINCIPLE)** (POSITIVE, Change: SHIFTED): The bank has successfully shifted its loan book towards a more granular mix, with Retail and Commercial segments now making up 73.2% of total advances. (1 shifted)
  > Granularization in Advances led by… Retail + Commercial 73.2% (H1FY26)
- Yes Bank is India's 6th largest private sector bank, operating as a full-service (universal) bank that provides a wide range of financial products to retail customers, small businesses, and large corporations. It is known for its digital leadership, processing approximately one in three digital transactions in India, and is supported by major institutional shareholders like State Bank of India and Sumitomo Mitsui Banking Corporation. (+1 more finding) (NEUTRAL)
  > 6th Largest Private Bank in India; Universal Bank Comprehensive Product Suite for Retail, Commercial, Corporates & Institutional Segment; Digital Leadership Processes every 1 in 3 Digital Transactions in India

### Future Growth

- **[CATALYST] Credit Growth Cycle Acceleration** (POSITIVE, Trend: STEADY): Capital levels have dipped slightly due to growth and risk-weight changes, but remain healthy and are expected to rise following warrant exercises. (1 decelerating, 2 steady across 3 signals)
  > CET 1 Ratio at 12.2% ... Pro-forma basis, CET-I% as of March 31, 2024 including these proceeds [Warrants] is at 12.7%
- **[METRIC] Fee Income Percentage of Total Income** (POSITIVE, Trend: ACCELERATING): Credit card spending is accelerating sharply, with Q4FY24 showing the highest ever spends for the bank. (5 accelerating across 5 signals, 1 leading indicator)
  > Entered into a Strategic Bancassurance Partnership with LIC to offer life insurance solutions across YES BANK’s network and digital platforms.
- **[METRIC] Net Interest Margin** (POSITIVE, Trend: ACCELERATING): The bank is successfully reducing the drag from mandated low-yield deposits by meeting Priority Sector Lending (PSL) targets organically. (5 accelerating across 5 signals)
  > Negligible Shortfall in PSL sub-categories in FY24 ... SMF [Shortfall] 0.0%
- **[METRIC] Return on Equity ROE** (POSITIVE, Trend: ACCELERATING): RoA has shown significant improvement, more than doubling year-over-year, though it remains below the 1% milestone mentioned in previous targets. (5 accelerating across 5 signals)
  > Return on Assets (RoA)... Q3FY26 1.0%
- **[PRINCIPLE] CASA Franchise as Structural Moat** (POSITIVE, Trend: ACCELERATING): The bank is continuing its physical footprint expansion to target CASA-rich clusters, adding 9 new branches in the current quarter. (2 steady, 1 accelerating across 3 signals)
  > added nearly 140 new branches since January '23 in CASA rich clusters including 9 in Quarter 1 of FY '25.
- **[PRINCIPLE] Technology and Digital Banking Leadership** (POSITIVE, Trend: ACCELERATING): Digital adoption via the IRIS app is accelerating, with registered users growing 14% quarter-on-quarter to reach 26.6 lakh. (3 accelerating, 2 new trend across 5 signals)
  > 44 Lakhs Registered customers... 6% (Q-o-Q)
- **[PRINCIPLE] Management Quality and Governance Standards** (POSITIVE, Trend: STEADY): Capital adequacy remains strong and stable at 13.3%, significantly improved from the stress period of FY20, providing a solid foundation for future credit growth. (2 steady across 2 signals)
  > CET I 13.3% Q1FY25
- **[PRINCIPLE] Retail vs Corporate Loan Mix** (POSITIVE, Trend: NEW_TREND): The bank is successfully shifting its loan mix toward granular segments, with Retail and SME now making up 62% of the book compared to 59% a year ago. (2 accelerating, 1 new trend, 2 steady across 5 signals)
  > Sustained momentum in Retail + Commercial Segment Growth... CAGR: 18.5%... 186,827 [9MFY26]
- **[TREND] Deposit Mobilization Competition** (POSITIVE, Trend: ACCELERATING): Physical distribution expansion is steady, with 134 new branches opened since January 2023 to support deposit mobilization. (1 steady, 1 accelerating across 2 signals)
  > Premises costs for Q4FY24 up 21.7% Y-o-Y ... largely led by 134 new branches opened since Jan’23
- **[TREND] Unsecured Lending Stress Buildup** (NEGATIVE, Trend: DECELERATING): The bank is intentionally slowing down unsecured lending and credit cards due to market-wide stress, leading to muted growth in this high-yield segment. (3 decelerating across 3 signals)
  > unsecured book in line with the market has some issue... as a result, you will also see a muted growth around unsecured.
- Capital levels saw a significant boost this quarter due to warrant exercises by major private equity investors, providing a strong runway for growth. (5 accelerating across 5 signals, 2 leading indicators) (POSITIVE, Trend: ACCELERATING)
  > Spends in Cr... 11,705... 26.2% Y-o-Y

### Risk Assessment

- **[CATALYST] SEBI/RBI Governance Regulatory Action** (NEUTRAL): The risk remains high but is transitioning into a phase of strategic partnership. While the legacy PSL drag persists, the entry of SMBC as a 20% shareholder (becoming the largest) is intended to drive a 'next phase of growth and profitability' which may eventually offset these costs through better global expertise and capital access. (1 stable)
  > The transaction is a significant milestone to drive YES Bank’s next phase of growth, profitability and value creation, leveraging SMBC’s global expertise in this phase
- **[METRIC] Credit Deposit CD Ratio (METRIC)** (POSITIVE, Risk: MODERATE): The CD ratio remains high at 87.4%, which is an increase from 86.6% in the same quarter last year, indicating continued reliance on a stretched deposit base. (1 intensifying, 2 easing, 2 stable)
  > CD Ratio 88.0% v/s. 84.5% Q2FY26
- **[METRIC] Net Interest Margin (METRIC)** (NEGATIVE, Risk: MODERATE): NIM is showing signs of stabilization and sequential improvement, rising to 2.5% in Q4 from a full-year average of 2.4%, supported by a rising CASA ratio of 34.3%. (5 easing, 1 high-severity)
  > Lower CASA + Higher Borrowing mix impact... Net Int. Income 2.4% [FY23] to 2.2% [9MFY26]
- **[METRIC] Return on Equity ROE** (POSITIVE): The Cost to Income ratio improved significantly to 67.1% from 74.3% a year ago, though it remains high compared to top-tier peers. (2 easing, 1 stable)
  > Cost to Income Ratio at 67.1% v/s 74.3% in Q1FY25 and 67.3% in Q4FY25
- **[METRIC] Gross NPA and Slippage Ratio (METRIC)** (POSITIVE, Risk: MODERATE): Asset quality is at its best since 2020, with Gross NPA at 1.6% and Net NPA at 0.3%. Slippage ratios also improved to 2.1%. (3 easing, 1 intensifying, 1 stable)
  > Overdue book of 31-90 days at INR 3,656 Crs down from INR 3,802 Crs in Q2FY26
- **[PRINCIPLE] CASA Franchise as Structural Moat** (POSITIVE): NIM is showing a slight upward trend, increasing 10bps year-on-year to 2.5%, supported by a 200bps improvement in the CASA ratio to 32.8%. (2 easing)
  > NIM flat Q-o-Q at 2.5% and up 10bps Y-o-Y... Improvement in CASA Ratio (up 200 bps Y-o-Y) to 32.8%
- **[PRINCIPLE] Technology and Digital Banking Leadership** (POSITIVE): The cost-to-income ratio improved significantly to 71.3% from 74.4% in the previous year, though it remains high compared to top-tier peers. (3 easing)
  > Cost-to-income ratio has improved to 71.3% from 74.4% in FY '24.
- **[PRINCIPLE] Management Quality and Governance Standards** (NEUTRAL): The transaction introduces a new governance structure where SMBC will nominate 2 Board Members. This shift in management oversight is aimed at driving 'Global Governance Standards' and operational efficiency, though the high cost-to-income ratio remains a current reality. (1 stable)
  > SMBC will have the right to nominate 2 Board Members on the Board of YES Bank... Benefit From... Global Governance Standards Of SMBC
- **[PRINCIPLE] Provisioning Coverage and Counter-Cyclical Buffers (PRINCIPLE)** (POSITIVE, Risk: LOW): The bank has now made 100% provision on outstanding Security Receipts (SRs), meaning the net carrying value is now NIL, removing the balance sheet risk. (2 resolved, 2 stable, 1 easing)
  > ~INR 43,000 Crs of NPLs sold to ARC
- **[PRINCIPLE] Retail vs Corporate Loan Mix (PRINCIPLE)** (NEUTRAL, Risk: MODERATE): The bank's retail loan book has a high concentration of unsecured or high-risk segments like Credit Cards and Personal Loans, which are more sensitive to economic downturns. [CONCENTRATION]
  > Personal Loans 16%, Credit Cards 6% [of Diversified retail book]
- **[TREND] Deposit Mobilization Competition (TREND)** (NEUTRAL, Risk: MODERATE): The entry of a global banking giant like SMBC (part of the 2nd largest banking group in Japan) is expected to 'Leverage Strong Parentage For Higher Trust,' which directly addresses the competitive disadvantage in deposit mobilization by improving brand reputation. (1 easing, 1 intensifying)
  > Moderate Yields (balanced risk profile) + Higher CoF [Cost of Funds]
- **[TREND] Post HDFC Merger Integration** (POSITIVE): The risk is easing as the bank achieved 100% PSL compliance in FY25, leading to a reduction in RIDF deposits from 11% to 8.7% of total assets, with a target to reach below 5% by FY27. (1 easing)
  > In FY '25, Bank had 100% compliance in PSL... which resulted in notable reduction of RIDF and other mandated deposits to 8.7% of Total Assets against 11% as at the end of FY '24.
- **[TREND] Unsecured Lending Stress Buildup** (POSITIVE): The retail book remains diversified but continues to grow in high-yield segments. Personal loans grew 70% Y-o-Y and Credit Cards grew 26.2% Y-o-Y in spends, increasing the potential risk during economic stress. (1 intensifying, 2 easing, 2 stable)
  > Personal Loans 70% Y-o-Y Disbursement Growth; Credit Cards 16% of diversified retail book
- The risk is easing as the balance of mandated low-yield deposits has reduced from a peak of INR 44,087 Crs (10.9% of assets) in FY24 to INR 29,225 Crs (6.9% of assets) in Q3FY26. Management expects this to drop below 5% over the next 2 years. (2 easing, 1 high-severity) (NEGATIVE, Risk: MODERATE)
  > Mandated deposits in lieu of PSL Shortfalls: At 6.9% of Assets a drag on income & profitability

### Scenario Analysis

- 5 positive impacts identified (POSITIVE)
  > ‘Leapfrogging’ from being Product Centric to Customer Centric - DIY I Assisted I Next Gen AI I Cloud Native
- 2 negative impacts identified (NEGATIVE)
  > Despite global headwinds such as tariffs, geopolitical tensions etc., India to remain the fastest-growing economy, buoyed by resilient fundamentals and strong domestic drivers

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