YES Bank Q4 Profit Jumps 45%, JM Financial Sees 17% Downside

April 20, 2026: YES Bank reported a 44.7% year-on-year jump in net profit to Rs 1,068.42 crore for the March quarter, but brokerage JM Financial has flagged a 17% downside risk in the stock, citing concerns over the sustainability of earnings driven largely by one-off recoveries.

Profit Growth and Core Financial Metrics

The private sector lender posted a significant increase in standalone net profit compared to Rs 738.12 crore in the same quarter last year. Net interest income (NII) rose 16% year-on-year to Rs 2,637.7 crore from Rs 2,276.36 crore, reflecting improved lending activity and margin expansion.

Loan growth strengthened to 11.1% during the quarter, while net interest margin (NIM) improved by 5 basis points sequentially. The bank reported fresh slippages of Rs 1,100 crore, slightly higher than Rs 1,050 crore in the previous quarter, although net slippages declined sharply to 0.32% due to elevated recoveries. Provision coverage ratio (PCR) stood at 81.9%.

Brokerage Flags Sustainability Concerns

Despite the strong quarterly performance, JM Financial maintained a cautious stance, reiterating a ‘SELL’ rating on the stock with a revised target price of Rs 17. This represents a 17% downside from current levels and is 10.52% lower than its earlier target of Rs 19 issued in January.

The brokerage noted that a large portion of the bank’s recent earnings improvement has been supported by recoveries from Security Receipts (SRs), which are finite in nature. As the recovery pool approaches exhaustion, the firm expects the contribution from such recoveries to decline significantly in the coming years.

According to JM Financial, the current valuation assumes a structurally stronger profitability profile that has yet to be demonstrated without reliance on recovery-led gains. The brokerage has valued the bank at 0.9 times its estimated FY28 price-to-book value.

Outlook on Recoveries and Credit Costs

The bank’s management has guided for lower SR recoveries of Rs 800–1,000 crore in FY27, compared with Rs 1,560 crore in FY26. This decline is expected to weigh on credit costs and earnings going forward.

Credit cost rose by 25 basis points quarter-on-quarter to 0.28%. Excluding SR recoveries, the credit cost stood significantly higher at 0.95%, indicating underlying pressure on asset quality. JM Financial highlighted that the support from recoveries is nearing its end, raising questions about earnings sustainability.

Growth Guidance and Profitability Targets

YES Bank has guided for double-digit loan growth in FY27, projecting overall growth in the range of 13–15%. Within this, retail lending is expected to grow by 10–11%, while corporate lending may expand by around 20%.

The bank has also set a medium-term NIM target of 3–3.5% over the next two to three years. Additionally, it expects incremental improvement in core return on assets (RoA) by 20–25 basis points in FY27.

However, JM Financial expressed skepticism about the sustainability of near 1% RoA levels without continued recovery support, noting that the core operating performance remains relatively weak.

Market Context and Valuation Debate

The contrasting views between the bank’s improving financial performance and the brokerage’s cautious outlook highlight the broader debate around valuation versus fundamentals in the banking sector. While YES Bank’s earnings momentum has been strong in recent quarters, much of the improvement has been driven by non-core factors.

Analysts are increasingly focusing on the bank’s ability to generate stable, core operating profits independent of recoveries. The tapering of SR recoveries and rising credit costs are expected to test the strength of its underlying business model in the coming financial years.

As the bank transitions away from recovery-led earnings, investors are likely to closely monitor asset quality trends, margin sustainability, and execution of growth guidance to assess whether the current valuation is justified.