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LONG TERM INVESTMENT CALL
21 July 2011
Industry CMP (INR) Target (INR) 52 week High/Low (INR) Market Cap (INR BN) 3M Avg. Daily Volumes P/BV FY12E Shareholding Pattern (%)
Others Institutions 12% 14%
Banking 317 420 382/233 111 2582830 1.9x
Q1FY12 Result Highlights • YES Bank (YES) delivered another strong quarter, with net profits increasing by 38.2% to INR 2163 Mn on YoY basis. This was contributed by higher growth in net interest income (NII) of INR 3.5 bn (35% YoY) & non interest income grew by 15% to INR 1.65 Bn on YoY basis. Growth in the non interest income was led by transaction banking (INR 420 Mn), financial advisory (INR 829 Mn), financial markets (INR 247 Mn) and branch banking fees & others (INR 157 Mn).
The major highlights were deposits registered a healthy growth of 44.1% along with advances growing by 26.1% on YoY basis. Current and Savings Account (CASA) deposits grew by 49.8% to INR 47.64 bn moving the CASA ratio to 10.9% Q1FY12 from 10.3% in Q4FY11. The Bank’s Balance Sheet grew by 39.2% to INR 569.63 bn in Q1FY12 Corporate & Institutional Banking accounted for 63.2% of the loan
portfolio, Commercial Banking 24.4% and Branch Banking 12.4%. The Commercial & Branch Banking franchise has delivered increased traction in Q1FY12, reflecting an increase in granularity in the loan book in line with Version 2.0 vision and strategy of the Bank.
400 380 360 340 320 300 280 260 240 220 200 Jul Sep Nov Jan May Mar Jul
For the quarter, margins remained flat sequentially at 2.8%; however on YoY basis there was a decrease of 30 bps due to higher cost of funds. In Q1FY12, the bank opened 41 branches, taking it’s the network to 255 & further plans to take the network to ~325 by the end of FY12. This will help in improving its retail franchise.
During the quarter, the bank’s asset quality improved further with gross and net NPA ratios at 0.17% and 0.01% (0.23% and 0.04% in Q1FY11), respectively. The bank’s provision coverage ratio improved further to 95.2% in Q4FY11 from 88.6% in Q4FY11.
Performance (%) 1 Month YES 9.7 NIFTY 5.9
* Source: Ace, Unicon Research
Bank was able to maintain healthy return ratios of RoA at 1.5% & RoE at 22.1% YoY. Capital adequacy ratio remained healthy at 16.2% and Tier I capital at 9.6%, which is likely to help the bank to continue the balance sheet growth.
3 Months -3.7 -4.9
1 Year 7.2 3.7
(INR in mn)
Particulars NII Operating Profit PAT
Actual 3542 3251 2161
Estimates 3842 3976 2311
Outlook & Valuation YES Bank has been able to register strong business growth, profitability with stable margins & strong asset quality. Additionally the bank is expanding ~125 branches every year, which would help to improve its CASA ratio to 15% in FY12E. We remain positive on long term prospects of the bank. At the CMP stock trades at 1.9x of its FY12E Book Value. We maintain BUY rating on the stock for target price of INR 420.
* Source: Ace, Unicon Research
Analyst Shweta Rane | firstname.lastname@example.org
Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: email@example.com
14 14.) NIMs Source: Company.23 15 3236 1075 2161 6.19 35.47 19.50 -2.11 35.8 Q1 FY11 7392 4771 2621 1438 4059 1570 2576 33.59 3.89 34. Unicon Financial Intermediaries.94 0 bps *Standalone Wealth Research.Financials (INR in mn) Interest income Interest expense Net Interest Income Other Income Total Operating income Operating expenditure Operating Profit Operating Profit (%) Provisions PBT Tax PAT EPS (INR.82 26.98 36.92 5.51 5.27 6.23 -6.35 38.1 Y-o-Y 89.36 -30 bps Q4 FY11 12226 8741 3485 1868 5353 1865 3488 28.91 27.97 23.68 126 2364 800 1564 4.in .95 4.8 Q-o-Q 14.19 -1044 bps -87.63 -11.59 1.21 2. Unicon Research Q1 FY12 13995 10454 3542 1653 5195 1944 3251 23.86 2. Email: firstname.lastname@example.org 5.79 -529 bps -96. Pvt Ltd.53 433 3055 1021 2034 5.33 119.
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