After the announcement of Yes Bank's Q3 update for the current financial year, the private lender’s share price saw strong buying activity during Friday’s market session. The excitement surrounding the update has placed the stock under the bulls' radar. Experts believe the impressive Q3 results have triggered this buying trend, with expectations that the stock could see significant gains in the coming weeks.
Yes Bank's Q3 Update
Yes Bank reported a solid performance in Q3 FY25, with a 14.6% year-on-year (YoY) increase in deposits, amounting to Rs 2.77 lakh crore, up from Rs 2.41 lakh crore in the same period last year. Despite a flat growth on a quarter-on-quarter (QoQ) basis, this uptick in deposits reflects a robust financial position. The bank also saw a 12.6% YoY rise in loans and advances, totalling Rs 2.45 lakh crore, with a 4.2% sequential growth.
Moreover, the bank’s CASA (current and savings account) deposits grew by an impressive 27.6% YoY, reaching Rs 91,575 crore, reflecting a healthy 3.4% QoQ increase. This surge in CASA deposits demonstrates the bank’s strong foundation and ability to attract low-cost deposits, which bodes well for future profitability.
Anshul Jain, Head of Research at Lakshmishree Investment and Securities, highlighted that Yes Bank’s growth momentum in Q3 FY25 is indicative of its continued resilience and operational efficiency. While deposits grew substantially, advances also saw significant growth, indicating a favorable outlook for the bank in the upcoming quarters.
Improved Cost of Funding and Liquidity Ratios
Yes Bank’s cost of funding showed improvement, with the CASA ratio increasing to 33% as of December 31, 2024, compared to 32% in the previous quarter and 29.7% a year ago. This increase reflects the bank’s ability to maintain a healthy deposit base and manage funding costs effectively. Additionally, the liquidity coverage ratio (LCR) stood at a solid 133.2%, up from 132% in Q2 FY25, and well above the 118.4% recorded a year earlier, further affirming the bank's strong liquidity position.
Abhishek Pandya, Research Analyst at StoxBox, noted the improvement in the credit-deposit (CD) ratio, which stood at 88.4% as of December 31, 2024, compared to 84.8% in the previous quarter. While this marks progress, Pandya also pointed out that the bank's deposits are growing faster than its advances, suggesting a cautious approach in the face of potential stress in sectors like microfinance institutions (MFIs) and unsecured lending. This conservative stance is an important factor for investors to consider moving forward.
Despite the positive growth in key metrics, analysts caution that Yes Bank may face challenges in the medium term. There could be pressure on its Net Interest Margin (NIM) due to a shortfall in Priority Sector Lending (PSL) compliance, which the bank has parked in low-yielding investments. While this is a short-term concern, it remains a factor that investors need to monitor closely in the upcoming quarters.
Furthermore, the overall banking sector is experiencing some strain, particularly in segments like MFIs and unsecured lending. Therefore, investors should keep an eye on Yes Bank's asset quality ratios, profitability, and management commentary in the upcoming results for a clearer picture of the bank's long-term health.
Yes Bank Share Price Target and Investment Strategy
Following the positive Q3 update, stock market experts remain bullish on Yes Bank shares. Sugandha Sachdeva, Founder of SS WealthStreet, highlighted that the stock has formed a short-term base around Rs 19-18.80 on monthly charts. As long as this level holds, there is potential for the stock to recover, with a near-term target of Rs 21.20 to Rs 22. A sustained momentum above Rs 22 could pave the way for a rally toward Rs 24.
Although the stock is currently trading below key moving averages, the improving fundamentals and positive growth trajectory suggest that Yes Bank could bounce back in the near future. Sachdeva emphasized the importance of maintaining a strict stop-loss strategy and closely monitoring the market's direction, along with any developments related to the bank, which could significantly impact its stock price.
Should You Buy Yes Bank Shares?
Yes Bank’s Q3 results have impressed the market, showing strong growth in key financial metrics. The bank’s solid deposit growth, improved CASA ratio, and rising loans and advances are encouraging signs for investors. However, challenges like potential pressure on NIM and the bank's cautious stance in certain lending segments are factors to watch out for.
For investors looking to buy Yes Bank shares, the stock presents an opportunity for recovery and growth, especially if it holds above Rs 18.80 and continues its upward momentum. A target of Rs 22 to Rs 24 seems achievable in the near term. However, it’s crucial to implement a risk management strategy, including stop-losses and a close eye on the bank’s performance in the coming quarters.
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