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Yes Bank
CMP: ` 453
BSE Sensex NSE Nifty Scrip Details Equity Face Value Market Cap 52 week High / Low Avg. Volume (no) BSE Code NSE Symbol Bloomberg Code ` 3586mn ` 10/` 163bn USD 2.8bn ` 547 / 322 1,782,216 532648 YESBANK YES IN YESB.BO 18,774 5,668
DOLAT CAPITAL
Buy
We recently met with the management of Yes Bank where the bank re-iterated its earlier growth and credit costs targets. The recent issue related to the appointment of promoter director/independent director should also come to pass. Yes Bank should continue its current balance sheet growth rate of around 30% combined with stable asset quality. NIM is set to improve further aided by lower cost of funds and improvement in CASA. The bank would be raising equity capital in the next 6-9 months which would entail a dilution of around 15% on existing equity (almost similar to the last equity issuance). Recent media reports on the Board level appointments showed the bank in bad light. In our view, if the promoter director appointment would have been made, the issue could still have been raised in the guise of nepotism. In our view, the banks stand is pragmatic where the Board would decide on the appointment at the meeting to be held on 27th June. We find current valuation of 2.3x on FY14 BVPS attractive and maintain our Buy rating on the stock with target price of ` 565 based on PBR of 2.8x on our FY14 BVPS forecasts.
India Research
Reuters Code
Yes Bank relative to Sensex 140 130 120 110 100 90 80 Aug-12 Dec-12 Feb-13 Jun-12 Apr-13 Oct-12 Jun-13
Yes Bank
Sensex
Financials
Year FY12 FY13 FY14E FY15E Figures in ` mn NII 16,156 22,188 29,551 37,627 PPP 15,402 21,417 28,386 35,908
NP NIM (%) BV (`) ABV (`) RoAA (%) RoAE (%) P/B (x) P/ABV (x) P/E (x) 23.1 3.42 3.43 16.4 9,770 2.6 132 132 1.5 13,007 2.7 162 162 1.5 24.8 2.80 2.80 12.5 16,603 2.8 199 199 1.5 25.6 2.27 2.28 9.8 20,817 3.0 248 246 1.5 26.0 1.83 1.84 7.8
Sr. Analyst: Rajiv Pathak Tel : +9122 4096 9750 E-mail: rajiv@dolatcapital.com
India Research
DOLAT CAPITAL
The bank has mandates from 40 co-operative banks to provide debit card services to their customers. These cooperative banks maintain funds in the form of current account deposits with Yes Bank which is adjusted against the withdrawals by the cooperative bank customers. In the interim period, Yes Bank does tend to benefit from the float. However, there has not been sell-down of loans to the cooperative banks. Cost of funds on the bulk deposits and CDs have seen a decline and would aid in improving the NIM which was flat QoQ at 3% in Q4FY13. For FY14, NIM can see an almost 20bps improvement. Fee income: Non-interest income growth to remain strong driven by the advisory fees which grew 62% YoY in Q4FY13. Almost 1/3rd of the advisory income (` 1.7bn in Q4) was derived from loan syndication and related businesses which still remains the prime driver for the advisory income. Other fee income streams like third party distribution and trade/guarantee fees would also support the high fee income growth going forward. Network: Yes Bank held 146 branch licenses and plans to open around 30 branches per quarter going forward. The bank would also increasingly focus on opening small branches in smaller towns following a hub and spoke model. Loan appraisals are all centralized at its processing and approval centers to mitigate the credit risks. Cobrapost and fraudulent internet banking transaction: The bank does not see any fallout from the Cobrapost operations, however the recent case of fraudulent internet banking transaction impacting one of its corporate customer had led to an increase in the enquiries and anxieties for some customers (both existing and target). The bank has strengthened its IT system processes even further and allayed the apprehensions of the existing as well as target customers and does not see an impact on new customer acquisitions. Valuation We believe that the bank is well placed to grow its balance sheet at CAGR of 24% over the next two years. We believe that despite the rise in NPL that we are factoring over the next two year, Yes Banks asset quality should remain amongst the best in industry. Softening of bulk deposit rates over the next one year, improvement in CASA should aid the NIM expansion. Despite the increase in credit cost; improving NIM, high balance sheet growth, fee and treasury income growth should help drive the 27% CAGR in net profit during FY13-15E. Current valuation of 2.3x on FY14 BVPS attractive, maintain our Buy rating on the stock with target price of ` 565 based on PBR of 2.8x on our FY14 BVPS forecasts.
Yes Bank
India Research
INCOME STATEMENT Particulars Interest Income Interest Expenses Net Interest Income CEB Profits on sale of investments Profits on foreign exchange Other operating income Total other income Total Income Salaries Other operating costs Total Overheads Profit before provisions Total provisions Profit before tax Tax Reported Net profit BALANCE SHEET Particulars Cash with RBI and Call Money Investments Advances Fixed Assets Other Assets Total Assets Demand Deposits Savings Deposits Term Deposits Total Deposits Borrowings Other Liabilities & Provisions Equity Reserves Total Equity Total Liab & Equity E-estimates Mar12 35,855 277,574 379,886 1,771 41,535 736,621 48,884 25,038 417,596 491,517 141,565 56,773 3,530 43,236 46,766 736,621 Mar13 40,658 429,760 469,996 2,296 48,333 Mar14E 42,690 481,332 610,994 2,640 65,887 Mar12 63,074 46,917 16,156 7,677 379 268 248 8,571 24,727 4,752 4,574 9,325 15,402 902 14,500 4,730 9,770 Mar13 82,940 60,752 22,188 10,762 1,557 667 (411) 12,574 34,762 6,555 6,790 13,345 21,417 2,160 19,257 6,251 13,007 Mar14E 100,043 70,492 29,551 12,376 2,024 833 150 15,383 44,934 8,129 8,420 16,548 28,386 3,970 24,416 7,813 16,603
DOLAT CAPITAL
` mn Mar15E 118,926 81,299 37,627 14,852 2,428 1,017 173 18,469 56,096 9,917 10,272 20,189 35,908 5,295 30,613 9,796 20,817 IMPORTANT RATIOS Particulars DPS (`) Book Value (`) Adjusted Book Value (`) EPS (`) Payout (%) Tier 1 (%) CAR (%) Net interest margin (%) Credit Spread (%) Cost-to-income (%) Growth (%) NII Non-interest income Operating cost PPOP Provisions PAT Networth Deposits Loans Total Assets ROAA breakdown Gross Interest spread Less Provisions Net Interest spread Less Overheads Net spread Other income Less Tax ROAA ROAE Valuation Price Earnings (x) Price to Book Value (x) Price to Adjusted BV (x) Dividend Yield (%) Asset Quality Gross NPLs Net NPLs Provision coverage ratio (%) Gross NPLs (%) Net NPLs (%) Assumptions Yield on Advances (%) Yield on Investment (%) Cost of Deposits (%) Growth in credit book (%) Growth in Deposits (%) Growth in Investments (%) Gross slippages ratio (%) Credit Cost (%) E-estimates Mar12 4 132 132 28 16.2 9.9 17.9 2.6 1.9 37.7 Mar13 6 162 162 36 18.5 9.5 18.3 2.7 2.1 38.4 Mar14E Mar15E 8 199 199 46 18.1 8.9 16.3 2.8 2.4 36.8 9 248 246 58 16.4 8.1 14.3 3.0 2.7 36.0
30 38 37 29 (8) 34 23 7 11 25
37 47 43 39 139 33 24 36 24 35
33 22 24 33 84 28 23 29 30 21
27 20 22 26 33 25 24 33 33 24
991,042 1,203,543 1,497,786 66,649 60,227 542,681 669,556 209,221 54,187 3,586 54,491 58,077 86,643 113,503 84,318 115,515 694,631 923,859 865,592 1,152,878 209,522 198,660 56,897 57,466 3,586 3,586 67,946 85,196 71,532 88,783
Yes Bank
DOLAT CAPITAL
BUY ACCUMULATE REDUCE SELL Upside above 20% Upside above 5% and up to 20% Upside of upto 5% or downside of upto 15% Downside of more than 15%
Analyst Amit Khurana, CFA Amit Purohit Milind Bhangale Mayur Milak Nehal Shah Priyank Chandra Rahul Jain Rajiv Pathak Ram Modi Prachi Save
Sector/Industry/Coverage Co-Head Equities and Director - Research Consumer Pharma Auto & Auto Ancillary Midcaps & Agrochem Oil & Gas IT Services Financials Metals & Mining Derivatives
E-mail amit@dolatcapital.com amitp@dolatcapital.com milindb@dolatcapital.com mayurm@dolatcapital.com nehals@dolatcapital.com priyank@dolatcapital.com rahul@dolatcapital.com rajiv@dolatcapital.com ram@dolatcapital.com prachi@dolatcapital.com
Tel.+91-22-4096 9700 91-22-40969745 91-22-40969724 91-22-40969731 91-22-40969749 91-22-40969753 91-22-40969737 91-22-40969754 91-22-40969750 91-22-40969756 91-22-40969733
Tel.+91-22-4096 9700 91-22-40969726 91-22-40969706 91-22-40969725 Tel.+91-22-4096 9797 91-22-40969747 91-22-40969746 91-22-40969735 91-22-40969705 91-22-40969748 91-22-40969702 91-22-40969708 91-22-40969728 91-22-40969707 91-22-40969734
Equity Sales/Trading Designation Purvag Shah Vikram Babulkar Kapil Yadav Parthiv Dalal Jatin Padharia Chirag Makati Aadil R. Sethna P. Sridhar Chandrakant Ware Jitendra Tolani Principal Co-Head Equities and Head of Equity Sales AVP - Institutional Sales AVP - Institutional Sales Institutional Sales - FII AVP - Sales Trading Head of Derivatives Head Sales - Trading Senior Sales Trader Sales Trader
purvag@dolatcapital.com vikram@dolatcapital.com kapil@dolatcapital.com parthiv@dolatcapital.com jatin@dolatcapital.com chiragm@dolatcapital.com aadil@dolatcapital.com sridhar@dolatcapital.com chandrakant@dolatcapital.com jitendrat@dolatcapital.com
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