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Yes Bank

Yes Bank

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Published by Angel Broking

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Categories:Business/Law, Finance
Published by: Angel Broking on Oct 24, 2011
Copyright:Attribution Non-commercial

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10/24/2011

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Please refer to important disclosures at the end of this report
 1 
Particulars (
`
cr) 2QFY12 1QFY12
% chg (qoq)
2QFY11
% chg (yoy)
NII 386 354
8.9
313
23.1
Pre-prov. profit 386 325
18.7
281
37.1
PAT 235 216
8.8
176
33.3
 Source: Company, Angel Research
For 2QFY2012, Yes Bank reported a strong performance. Net profit grew by 33.3% yoy (8.8% qoq) to
 ` 
235cr, above our estimate of
 ` 
216cr. Profit growth wasdriven by 10bp increment in NIM and strong non-interest income, whichregistered 63.4% yoy growth. The bank continued with its strategy of slowerbalance sheet growth in 2QFY2012 to manage margins and risks in the currentenvironment.
We maintain our Accumulate rating on the stock.
 
Business growth moderates; steady NIM and strong asset quality
: The bankcontinued with its strategy of slower balance sheet growth in 2QFY2012 tomanage margins and risks in the current environment. Advances grew by 12.7%yoy (3.3% qoq) and deposits grew by 10.2% yoy (1.1% qoq). CASA depositsaccretion remained healthy at 19.7% yoy (almost flat qoq). The bank managed toincrease its CASA ratio marginally by 4bp qoq to 11.0% due to the relative slowerdeposit growth. Reported NIM rose by 10bp qoq to 2.9% as yield on advancesgrew by 60bp to 12.2%. Higher yield on advances was supported by the 51.3%qoq growth in credit substitutes to
 ` 
6,566cr. Thus, NII posted healthy growth of23.1% yoy. The bank witnessed some weakening in NPA ratios in 2QFY2012;however, gross NPA ratio at 0.3% (0.2% in 1QFY2012) and net NPA ratio at0.04% (0.01% in 1QFY2012) continued to be the best in the industry.
Outlook and valuation:
Structurally, we believe there may be downside risks to thebank’s RoA as Yes Bank’s balance sheet continues to grow rapidly. On theliabilities side, building a savings deposit franchise involves execution risks.On the positive side, the bank has doubled its branch network over the last 18months to 305 branches. Also, we believe we are very close to the peak of thecurrent interest rate cycle; and as liquidity has improved compared to the extremetightness during the last few quarters, the environment is expected to be relatively more conducive for banks such as Yes Bank. The stock is trading at1.8x FY2013E ABV.
We maintain our Accumulate recommendation on the stockwith a target price of
`
324.Key financials
 
Y/E March (
`
cr) FY2010 FY2011 FY2012E FY2013ENII
788 1,247 1,564 1,884
% chg
54.1 58.2 25.4 20.5
Net profit
478 727 924 1,046
% chg
57.2 52.2 27.1 13.2
NIM (%)
2.8 2.7 2.4 2.4
EPS (
`
)
14.1 20.9 26.6 30.1
P/E (x)
20.2 13.6 10.7 9.5
P/ABV (x)
3.1 2.6 2.2 1.8
RoA (%)
1.6 1.5 1.4 1.3
RoE (%)
20.3 21.1 22.0 20.8
 Source: Company, Angel Research
 
ACCUMULATE
CMP
 ` 
285Target Price
 ` 
324Investment Period 12 Months
Stock InfoSector BankingMarket Cap (
 ` 
cr) 10,010Beta 1.452 Week High / Low 388/234 Avg. Daily Volume 3,72,615Face Value (
 ` 
) 10BSE Sensex 16,937Nifty 5,092Reuters Code YESB.BOBloomberg Code YES@INShareholding Pattern (%)Promoters 26.3MF / Banks / Indian Fls 9.7FII / NRIs / OCBs 50.7Indian Public / Others 13.4 Abs. (%) 3m 1yr 3yrSensex(8.5) (14.8) 69.8Yes Bank(10.6) (19.1) 259.1
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808vaibhav.agrawal@angelbroking.com
Shrinivas Bhutda
022 – 3935 7800 Ext: 6845shrinivas.bhutda@angelbroking.com
Varun Varma
022 – 3935 7800 Ext: 6847varun.varma@angelbroking.com
Yes Bank
Performance Highlights
2QFY2012 Result Update | Banking
October 20, 2011
 
 
Yes Bank | 2QFY2012 Result Update
 
October 20, 2011
 2
Exhibit 1:
 
2QFY2012 performance summary 
Particulars (
`
cr) 2QFY12 1QFY12
% chg (qoq)
2QFY11
% chg (yoy)
Interest earned 1,439 1,400
2.8
954
50.8
- on Advances / Bills 1,032 1,026
0.5
725
 42.3
- on investments 398 365
9.1
224
77.3
- on balance with RBI & others 4 8
(48.1)
3
 46.8
- on others 5 1
691.5
1
 243.4
Interest Expended 1,053 1,045
0.7
641
64.4
Net Interest Income 386 354
8.9
313
23.1
Other income 214 165
29.5
131
63.4
- Financial markets 25 24
 2.5
23
9.3
- Financial advisory 83 77
7.4
76
8.9
- Transaction banking 42 65
(35.8)
34
 22.4
- Retail and others 16 20
(21.9)
11
 44.0
Operating income 600 519
15.4
444
35.0
Operating expenses 214 194
10.0
163
31.3
- Employee expenses 110 110
0.1
88
 25.3
- Other Opex 104 85
 22.8
75
38.4
Pre-provision Profit 386 325
18.7
281
37.1
Provisions & Contingencies 38 2
2,407.9
17
117.1
PBT 348 324
7.6
264
31.9
Provision for Tax 113 108
5.1
88
28.9
PAT 235 216
8.8
176
33.3
Effective Tax Rate (%) 32.5 33.2
(75)bp
33.2
(75)bp
 Source: Company, Angel Research
Exhibit 2:
 
2QFY2012 – Actual vs. estimates
Particulars (
`
cr) Actual Estimates
Var. (%)
Net interest income 386 366
5.4
Other income 214 186
15.4
Operating income 600 552
8.7
Operating expenses 214 209
 2.2
Pre-prov. profit 386 342
12.7
Provisions & cont. 38 22
70.4
PBT 348 320
8.7
Prov. for taxes 113 104
8.8
PAT 235 216
8.7
 Source: Company, Angel Research
 
 
Yes Bank | 2QFY2012 Result Update
 
October 20, 2011
 3
Exhibit 3:
 
2QFY2012 performance analysis
Particulars 2QFY12 1QFY12
% chg (qoq)
2QFY11
% chg (yoy)
Balance sheet
 Advances (
 ` 
cr) 34,194 33,104
3.3
30,348
12.7
Deposits (
 ` 
cr) 44,076 43,576
1.1
40,014
10.2
Credit-to-Deposit Ratio (%) 77.6 76.0
161bp
75.8
174bp
CASA deposits (
 ` 
cr) 4,839 4,764
1.6
4,041
19.7
CASA ratio (%) 11.0 10.9
 4bp
10.1
88bp
CAR (%) 16.0 16.2
(24)bp
19.4
(345)bp
Tier 1 CAR (%) 9.4 9.6
(20)bp
11.0
(160)bp
Profitability Ratios (%)
Yield on advances 12.2 11.6
60bp
9.5
 270bp
Cost of funds 8.6 8.5
10bp
6.7
190bp
Reported NIM 2.9 2.8
10bp
3.0
(10)bp
Cost-to-income ratio 35.6 37.4
(177)bp
36.6
(100)bp
Asset quality
Gross NPAs (
 ` 
cr) 69 56
 23.0
68
1.6
Gross NPAs (%) 0.3 0.2
13bp
0.2
8bp
Net NPAs (
 ` 
cr) 14 3
 410.9
17
(20.5)
Net NPAs (%) 0.0 0.0
3bp
0.1
(2)bp
Provision Coverage Ratio (%) 80.2 95.2
(1,505)bp
74.7
552bp
 Source: Company, Angel Research
Slower balance sheet growth in 2QFY2012
The bank continued with its strategy of slower balance sheet growth in 2QFY2012to manage margins and risks in the current environment. Advances grew by 12.7%yoy (3.3% qoq) and deposits grew by 10.2% yoy (1.1% qoq). Branch bankingcontinued to witness traction as its share in total advances increased by 3bp qoq to15% during the quarter.CASA deposits accretion remained healthy at 19.7% yoy (almost flat sequentially).Due to the relative slower growth in deposits, the bank managed to increase itsCASA ratio marginally by 4bp qoq to 11.0%. The share of Certificate of Deposits(CDs) decreased to ~12% of deposits from 13.4% in 1QFY2012.During the quarter, the bank opened 50 branches and recruited 329 newemployees. Management has indicated loan book growth of 25% in FY2012.

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