• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
Download
 
EmkayResearch
30 January 2008 1 
January 30, 2008
ACCUMULATE
Price
Rs243
Target Price
Rs260Sensex 18,092Price Performance
(%)
 
1M3M6M12M
Absolute(2)10 29 58Rel. to Sensex9 21 11 24
Source: Capitaline 
Stock Details
SectorBanksReuters YESB.BOBloomberg YES@INEquity Capital (Rs mn) 2947Face Value 1052 Week H/L 278/117Market Cap Rs72.1bn/US$1.8bnDaily Avg Volume (No of shares) 1.3mnDaily Avg Turnover (US$)7.7
Shareholding Pattern (%)
(31st Dec.’07)
 
Promoters
34.1
FII
52.5
Institutions
4.1
Private Corp.
2.3
Public
7.0 
Yes Bank
Rapid growth continues
Emkay
Research
   R  e  s  u   l   t   U  p   d  a   t  e
Yes Bank has reported Rs542mn of net profit for Q3FY08, far ahead of ourexpectations of Rs463mn. However NII of Rs 930mn, came inline withexpectations. The robust performance has been driven by robust advance growthand higher yield on advances, which supported the NIM’s. The operating profitgrew 110.8% yoy to Rs1009mn led by robust growth in other income. The bankhas used the robust profitability to provide for general loan losses. The feeincome growth continues to remain robust. The RoA remained strong at 1.53%,much better than the peers in private sector.We continue to remain upbeat on Yes Bank’s business model of knowledgeexpertise and consequent robust balance between fund and non-fund basedincome. At the current valuations, the stock is quoting at 14.5x FY10E EPS and2.9x FY10E ABV. We maintain our ACCUMULATE Rating on the stock with pricetarget of Rs260.
NII growth continues to remain strong
Yes Bank’s NII has grown by 81.5% yoy for Q3FY08 to Rs930mn, inline with ourexpectations. The strong performance has been driven by higher yield on advances androbust advance growth.
… As business growth continues at strong pace
The advances have grown by 79% yoy to Rs86bn, which was driven by smart growth in allsegments. The deposits have grown by 103.8% yoy to Rs111.3bn with CASA proportiongoing up by 150bps yoy.
Business growth
Rs mn
 
Q3FY08
Q3FY07
 
Q2FY08
 
% y-o-y chng
 
% q-o-q chng
Advances
Corporate 50,728 30,240 50,582 67.8 0.3SME 34,048 17,280 24,051 97.0 41.6Others 1,204 480 526 150.8 128.8Total 85,980 48,000 75,159 79.1 14.4
Deposits
Total 111,289 54,610 99,302 103.8 12.1CASA 8,948 3,987 7,358 124.4 21.6CASA (%) 8.04 7.30 7.41
Source: Company, Emkay Research, The bank has reclassified the loan segments during the quarter. Hence, the numbers are not stircitly comparable and are only estimated for Q2FY08.
… with stable NIMs
The banks NIM remain stable at 2.62% for the quarter supported by higher advancesyield, which expanded 128bps yoy to 11.2% respectively.
Yield analysis (%)
 
(%)
Q3FY08 Q3FY07 Q2FY08 yoy chg (bps)
 
qoq chg (bps)
Yield on advances 12.67 11.39 11.52 128 114Yield on assets 9.77 8.99 9.73 78 4Cost of funds 7.15 6.15 7.08 99 7NIM 2.62 2.84 2.66 -21 -3Yield on advances (Reported) 11.40 9.60 11.60 180 -20Yield on assets (Reported) 11.20 10.20 11.30 100 -10Cost of funds (Reported) 8.30 7.20 8.40 110 -10NIM (Reported) 2.90 3.00 2.90 -10 0
Source: Company, Emkay Research, calculated on average quarterly balances 
Kashyap Jhaveri
Kashyap.jhaveri@emkayshare.com +91 22 6612 1249
Pradeep Agrawal
pradeep.agrawal@emkayshare.com +91 22 6612 1340
 
 Y
ES
B
ANK
Result Update
 
EmkayResearch
30 January 2008 2 
Fee income growth – upward trend continues
The other income jumped 124% yoy to Rs968mn driven by smart performance of all theincome streams like financial advisory, wealth management business and transactionbanking. The wealth management and transaction banking businesses have continuedtheir momentum and now contribute about 12% and 15% respectively to total otherincome. We expect the contribution from these businesses to grow further going forward,given the increased management thrust on these business activities.
Other income
 
Rs mn
 
Q2FY08 Q2FY07 Q1FY08 % yoy chg % qoq chg
Financial markets 523 186 364 180.9 43.5Financial advisory 136 113 190 20.4 -28.6Wealth Management 116 61 68 91.7 70.0Transaction Banking 145 48 84 205.0 73.9Others 48 26 53 86.4 -8.9
Total
968 433 759 123.7 27.5
Source: Company, Emkay Research 
Higher Opex led by branch expansion and increased hiring
The Opex for the quarter has grown by 90.6% yoy driven by branch expansion andexpansion in retail wealth management business. The branch network has expanded to60 operational branches now from 40 branches in FY07.The bank has additional licenses to open 57 new branches, out of which the managementexpects to open 20-30 new branches by the end of financial year. Moreover, the bankrecruited 1381 new employees in 9MFY08, taking the total employee strength to 3542employees.
Asset quality remains robust
There were no provisions for NPA during the quarter as the NPAs continued to be at zerolevel both, in gross as well as net terms.Capital Adequacy comfortableThe bank is comfortably capitalised with tier I CAR at 8.9% as the bank’s raised Rs3.4bn(USD84mn) through Preferential Equity Placement of 14.7 million to Orient Global. Inaddition, the bank is likely to raise more funds by way of issuance of up to 20 millionequity shares in one or more tranches.
Entry into new businesses – ARC, AMC and broking
 The bank also plans to enter into three new businesses over next 18 months. The bankhas already tied up with three state owned banks and a foreign bank for setting up anAsset Reconstruction Company. Yes Bank is likely to hold 29% stake in the venture.The bank is also looking at private banking as an extension to its knowledge bankingproposition. The bank has launched two funds, one each in food and agri business andlife science. The bank is also panning to set up and AMC in FY10.Yes Bank is also planning to start retail broking business in FY09. We believe that theretail broking business will not only help the bank to ramp up income from wealthmanagement business but will also help it investment banking division in the IPObusiness as it will give it wider distribution arm for the IPO mandate that the investmentbanking division undertakes.
Valuations and view
 We remain upbeat on Yes Bank’s business model of knowledge expertise and robustbalance between fund and non-fund based services. The entry into new businesseswhich are relatively less capital intensive will add further value to the bank.At the current valuations, the stock is quoting at 14.5x FY10E EPS and 2.9x FY10E ABV.We maintain our ACCUMULATE Rating on the stock with price target of Rs260.
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...