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Yes Bank - 1QFY2014 Result Update

Yes Bank - 1QFY2014 Result Update

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Published by Angel Broking
Yes Bank - 1QFY2014 Result Update
Yes Bank - 1QFY2014 Result Update

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Published by: Angel Broking on Jul 25, 2013
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Please refer to important disclosures at the end of this report
 1 
Particulars (
`
cr) 1QFY144QFY13
% chg (qoq)
1QFY13
% chg (yoy)
NII 659638
3.3
472
39.6
Pre-prov. profit 680634
7.3
460
 47.9
PAT 401362
10.7
290
38.2
 Source: Company, Angel Research
Yes Bank reported a strong operating performance during the quarter, which wason expected lines. NII expectedly grew by 39.6% yoy. Also, boosted by treasury gains of ~
 ` 
95cr, non-interest income registered a higher-than-estimated growth of53.4% yoy, thereby aiding pre-provisioning profit growth of 47.9% yoy. Gross andNet NPA ratios remained largely stable at 0.22% and 0.03%, respectively. The bankused the opportunity created by higher trading gains to make floating provisions of
 ` 
75cr and as a result provisioning expenses more than tripled on a yoy basis,bringing bottom-line growth to a still strong 38.2% yoy.
Business growth robust; NIMs stable qoq:
During the quarter, the bank registereda robust business growth, as its advances and deposits grew by 24.3% and 29.9%yoy, respectively. Customer Assets (loans & credit substitutes) grew at a robustpace of 24.2% yoy. CASA deposits grew by 61.1% yoy, thereby taking the CASA ratio to 20.2% up from 16.3% a year ago. Savings deposits rose by 120.6% yoy and 9.9% qoq to
 ` 
6,622cr. NIMs remained stable sequentially at 3.0%. Thebank’s non-interest income grew strongly by 53.4% yoy to
 ` 
442cr, as incomefrom ‘Financial markets’ segment more than tripled on a yoy basis. During thequarter, the slippages remained low at
 ` 
25cr (annualized slippage rate of 0.2%).Restructured advances remained under check at 0.29% of gross advances.
Outlook and valuation:
Overall, the bank has performed well so far on the assetquality front, with credit costs contained at ~35bp for FY2013. However goingahead, as per the management’s guidance of 50-60bp credit costs for currentfiscal and ‘adversely labeled assets’ at ~1-2% of loan book, a significant increasein provisioning costs for the bank can be expected from the current levels.Recent liquidity tightening measures expose Yes Bank to margin pressures giventhe wholesale dominated funding nature of the bank. The Management hasreiterated its intent to hike lending rates to mitigate the impact, in case themeasures are not temporary in nature. Moreover, on its investment book, as perthe Management, currently almost the entire Gsec book is at HTM, therefore noimmediate MTM impact, while the net MTM impact on aggregate basis on thecorporate bond portfolio is largely nil. At CMP, after the sharp correction recently, the stock trades at a relatively moremoderate valuation of 1.6x FY2015E ABV. However, we would prefer to wait andwatch macro developments in the near term, before we revisit our outlook and ratingon the stock. Currently,
we maintain our Neutral rating on the stock.Key financials
Y/E March (
`
cr) FY2012 FY2013 FY2014E FY2015ENII 1,616 2,219 2,877 3,595
% chg
 29.6 37.3 29.7 24.9
Net profit 977 1,301 1,539 1,777
% chg
34.4 33.1 18.3 15.5
NIM (%) 2.6 2.7 2.7 2.8
EPS (
`
) 27.7 36.3 42.9 49.5
P/E (x) 13.9 10.6 8.9 7.7P/ABV (x) 2.9 2.4 1.9 1.6RoA (%) 1.5 1.5 1.4 1.3RoE (%) 23.1 24.8 23.9 22.8
 Source: Company, Angel Research, CMP as of July 24, 2013
 
NEUTRAL
CMP
 ` 
383Target Price -Investment Period -
Stock InfoSectorBloomberg CodeShareholding Pattern (%)Promoters25.6MF / Banks / Indian Fls16.6FII / NRIs / OCBs46.5Indian Public / Others11.3 Abs. (%)3m1yr3yrSensex4.818.810.8YES(22.5)12.327.0BankingMarket Cap (
 ` 
cr)13,790Beta1.252 Week High / Low547/322 Avg. Daily Volume315,039Face Value (
 ` 
)10BSE Sensex20,091Nifty5,991Reuters CodeYESB.BOYES@IN
 
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808vaibhav.agrawal@angelbroking.com
Sourabh Taparia
022 – 3935 7800 Ext: 6872sourabh.taparia@angelbroking.com
Harshal Patkar
022 – 3935 7800 Ext: 6847harshal.patkar@angelbroking.com
Yes Bank
Performance Highlights
1QFY2014 Result Update | Banking
July 25, 2013
 
 
Yes Bank | 1QFY2014 Result Update
 
July 25, 2013
 2
Exhibit 1:
 
1QFY2014 performance summary (standalone)
Particulars (
`
cr) 1QFY144QFY13
% chg (qoq)
1QFY13
% chg (yoy)
FY2013FY2012
% chg
Interest earned 2,3982,288
4.8
1,886
27.1
8,2946,307
31.5
- on Advances / Bills 1,5201,465
3.7
1,247
 21.8
5,3974,427
 21.9
- on investments 874814
7.4
630
38.7
2,8591,847
54.8
- on balance with RBI & others 23
(24.0)
4
(48.2)
1723
(29.0)
- on others 25
(68.5)
5
(65.6)
2110
104.1
Interest Expended 1,7391,650
5.4
1,414
23.0
6,0754,692
29.5
Net Interest Income 659638
3.3
472
39.6
2,2191,616
37.3
Other income 442379
16.5
288
53.4
1,257857
46.7
- Financial markets 17472
143.2
47
 269.6
252183
38.1
- Financial advisory 144166
(13.3)
120
 20.1
550363
51.4
- Transaction banking 8893
(5.3)
80
10.8
323237
36.2
- Retail and others 3749
(25.5)
31
19.3
13274
78.2
Operating income 1,1011,018
8.2
760
44.8
3,4762,473
40.6
Operating expenses 421384
9.8
301
40.1
1,335933
43.1
- Employee expenses 201174
15.5
155
 29.6
656475
38.0
- Other Opex 220209
5.0
145
51.3
679457
 48.5
Pre-provision Profit 680634
7.3
460
47.9
2,1421,540
39.1
Provisions & Contingencies 9798
(0.6)
30
 223.2
21690
139.4
PBT 583536
8.7
430
35.7
1,9261,450
32.8
Provision for Tax 182174
 4.6
139
30.6
625473
32.1
PAT 401362
10.7
290
38.2
1,301977
33.1
Effective Tax Rate (%) 31.232.5
(124)bp
32.5
(122)bp
32.532.6
(0.5)
 
 Source: Company, Angel Research
Exhibit 2:
 
1QFY2014 – Actual vs. estimates
Particulars (
`
cr) Actual Estimates
Var. (%)
Net interest income 659 670
(1.7)
Other income 442 383
15.4
Operating income 1,101 1,053
4.5
Operating expenses 421 394
6.9
Pre-prov. profit 680 659
3.1
Provisions & cont. 97 87
11.6
PBT 583 572
1.9
Prov. for taxes 182 195
(6.4)
PAT 401 378
6.1
 Source: Company, Angel Research
 
 
Yes Bank | 1QFY2014 Result Update
 
July 25, 2013
 3
Exhibit 3:
 
1QFY2014 performance analysis (standalone)
Particulars 1QFY14 4QFY13
% chg (qoq)
1QFY13
% chg (yoy)
Balance sheet
 Advances (
 ` 
cr) 47,898 47,000
1.9
38,534
 24.3
Deposits (
 ` 
cr) 65,225 66,956
(2.6)
50,208
 29.9
Credit-to-Deposit Ratio (%) 73.4 70.2
324bp
76.7
(331)bp
Current deposits (
 ` 
cr) 6,542 6,665
(1.8)
5,169
 26.6
Savings deposits (
 ` 
cr)
6,622 6,023
9.9
3,001
120.6
CASA deposits (
 ` 
cr) 13,163 12,688
3.7
8,170
61.1
CASA ratio (%) 20.2 18.9
123bp
16.3
391bp
CAR (%) 17.6 18.3
(70)bp
16.5
110bp
Tier 1 CAR (%) 9.7* 9.5
 20bp
9.2
50bp
Profitability Ratios (%)
Yield on advances 12.3 12.4
(10)bp
12.4
(10)bp
Cost of funds 8.3 8.4
(10)bp
9.0
(70)bp
Reported NIM 3.0 3.0
0bp
2.8
 20bp
Cost-to-income ratio 38.3 37.7
55bp
39.5
(130)bp
Asset quality
Gross NPAs (
 ` 
cr) 105 94
11.2
110
(4.2)
Gross NPAs (%) 0.2 0.2
 2bp
0.3
(6)bp
Net NPAs (
 ` 
cr) 12 7
72.8
24
(49.0)
Net NPAs (%) 0.03 0.01
 2bp
0.1
(3)bp
Provision Coverage Ratio (%) 88.5 92.6
(410)bp
78.4
1013bp
Provisions to avg. assets (%) 0.4 0.4
(3)bp
0.2
 23bp
 Source: Company, Angel Research,
*
Note including 1QFY2014 profits
Robust growth in customer assets
During the quarter, the bank registered a healthy growth in its business, asadvances grew by 24.3% yoy, while deposits increased by 29.9% yoy. Customer Assets (loans & credit substitutes) grew at a robust pace of 24.2% yoy. Within theCustomer Assets portfolio of the bank, the share of the Retail (including MSME)portfolio increased from 15.8% to 18.0% now, while the share of the Corporateportfolio (both large and mid corporate) declined from 84.2% to 82.0%.CASA deposits grew by 61.1% yoy, thereby taking the CASA ratio to 20.2% as of1QFY2014, up from 16.3% as of 1QFY2013 and 18.9% as of 4QFY2013.Savings deposits rose by 120.6% yoy and 9.9% qoq to
 ` 
6,622cr. As a result of thestrong performance on the CASA front, retail liabilities as a proportion of totaldeposits (CASA + retail term) have increased to 38.8% from 37.3% as of1QFY2013 and 35.5% as of 4QFY2013. The Management targets to increase theCASA ratio to 30%, and increase the share of retail deposits to total deposits to 55-60% in the next two years.

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