Yes Bank - 1QFY2014 Result Update

1QFY2014 Result Update | Banking
July 25, 2013
Yes Bank
Performance Highlights

NEUTRAL
CMP Target Price
% chg (qoq) 3.3 7.3 10.7 1QFY13 472 460 290 % chg (yoy) 39.6 47.9 38.2
`383 -
Particulars (` cr) NII Pre-prov. profit PAT
1QFY14 659 680 401
4QFY13 638 634 362
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code
Source: Company, Angel Research
Banking 13,790 1.2 547/322 315,039 10 20,091 5,991 YESB.BO YES@IN
Yes Bank reported a strong operating performance during the quarter, which was on 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 of 53.4% yoy, thereby aiding pre-provisioning profit growth of 47.9% yoy. Gross and Net NPA ratios remained largely stable at 0.22% and 0.03%, respectively. The bank used 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 registered a 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 robust pace 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%. The banks non-interest income grew strongly by 53.4% yoy to `442cr, as income from Financial markets segment more than tripled on a yoy basis. During the quarter, 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 asset quality front, with credit costs contained at ~35bp for FY2013. However going ahead, as per the managements guidance of 50-60bp credit costs for current fiscal and adversely labeled assets at ~1-2% of loan book, a significant increase in provisioning costs for the bank can be expected from the current levels. Recent liquidity tightening measures expose Yes Bank to margin pressures given the wholesale dominated funding nature of the bank. The Management has reiterated its intent to hike lending rates to mitigate the impact, in case the measures are not temporary in nature. Moreover, on its investment book, as per the Management, currently almost the entire Gsec book is at HTM, therefore no immediate MTM impact, while the net MTM impact on aggregate basis on the corporate bond portfolio is largely nil. At CMP, after the sharp correction recently, the stock trades at a relatively more moderate valuation of 1.6x FY2015E ABV. However, we would prefer to wait and watch macro developments in the near term, before we revisit our outlook and rating on the stock. Currently, we maintain our Neutral rating on the stock. Key financials
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%) FY2012 1,616 29.6 977 34.4 2.6 27.7 13.9 2.9 1.5 23.1 FY2013 2,219 37.3 1,301 33.1 2.7 36.3 10.6 2.4 1.5 24.8 FY2014E 2,877 29.7 1,539 18.3 2.7 42.9 8.9 1.9 1.4 23.9 FY2015E 3,595 24.9 1,777 15.5 2.8 49.5 7.7 1.6 1.3 22.8
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 25.6 16.6 46.5 11.3
Abs. (%) Sensex YES
3m 4.8 (22.5)
1yr 18.8 12.3
3yr 10.8 27.0
Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com
Sourabh Taparia
022 3935 7800 Ext: 6872 sourabh.taparia@angelbroking.com
Harshal Patkar
022 3935 7800 Ext: 6847 harshal.patkar@angelbroking.com
Source: Company, Angel Research, CMP as of July 24, 2013
Please refer to important disclosures at the end of this report
Yes Bank | 1QFY2014 Result Update
Exhibit 1: 1QFY2014 performance summary (standalone)

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income - Financial markets - Financial advisory - Transaction banking - Retail and others Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies PBT Provision for Tax PAT Effective Tax Rate (%)
1QFY14 2,398 1,520 874 2 2 1,739 659 442 174 144 88 37 1,101 421 201 220 680 97 583 182 401 31.2
4QFY13 2,288 1,465 814 3 5 1,650 638 379 72 166 93 49 1,018 384 174 209 634 98 536 174 362 32.5
% chg (qoq) 4.8 3.7 7.4 (24.0) (68.5) 5.4 3.3 16.5 143.2 (13.3) (5.3) (25.5) 8.2 9.8 15.5 5.0 7.3 (0.6) 8.7 4.6 10.7 (124)bp
1QFY13 1,886 1,247 630 4 5 1,414 472 288 47 120 80 31 760 301 155 145 460 30 430 139 290 32.5
% chg (yoy) 27.1 21.8 38.7 (48.2) (65.6) 23.0 39.6 53.4 269.6 20.1 10.8 19.3 44.8 40.1 29.6 51.3 47.9 223.2 35.7 30.6 38.2 (122)bp
FY2013 8,294 5,397 2,859 17 21 6,075 2,219 1,257 252 550 323 132 3,476 1,335 656 679 2,142 216 1,926 625 1,301 32.5
FY2012 6,307 4,427 1,847 23 10 4,692 1,616 857 183 363 237 74 2,473 933 475 457 1,540 90 1,450 473 977 32.6
% chg 31.5 21.9 54.8 (29.0) 104.1 29.5 37.3 46.7 38.1 51.4 36.2 78.2 40.6 43.1 38.0 48.5 39.1 139.4 32.8 32.1 33.1 (0.5)
Exhibit 2: 1QFY2014 Actual vs. estimates

Particulars (` cr) Net interest income Other income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Actual 659 442 1,101 421 680 97 583 182 401
Estimates 670 383 1,053 394 659 87 572 195 378
Var. (%) (1.7) 15.4 4.5 6.9 3.1 11.6 1.9 (6.4) 6.1
July 25, 2013
Exhibit 3: 1QFY2014 performance analysis (standalone)

Particulars Balance sheet Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) 47,898 65,225 73.4 6,542 6,622 13,163 20.2 17.6 9.7* 12.3 8.3 3.0 38.3 105 0.2 12 0.03 88.5 0.4 47,000 66,956 70.2 6,665 6,023 12,688 18.9 18.3 9.5 12.4 8.4 3.0 37.7 94 0.2 7 0.01 92.6 0.4 1.9 (2.6) 324bp (1.8) 9.9 3.7 123bp (70)bp 20bp (10)bp (10)bp 0bp 55bp 11.2 2bp 72.8 2bp (410)bp (3)bp 38,534 50,208 76.7 5,169 3,001 8,170 16.3 16.5 9.2 12.4 9.0 2.8 39.5 110 0.3 24 0.1 78.4 0.2 24.3 29.9 (331)bp 26.6 120.6 61.1 391bp 110bp 50bp (10)bp (70)bp 20bp (130)bp (4.2) (6)bp (49.0) (3)bp 1013bp 23bp 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)
Savings deposits (` cr)

CASA deposits (` cr) CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Yield on advances Cost of funds Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%) Provisions to avg. assets (%)
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, as advances 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 the Customer 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 Corporate portfolio (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 of 1QFY2014, 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 the strong performance on the CASA front, retail liabilities as a proportion of total deposits (CASA + retail term) have increased to 38.8% from 37.3% as of 1QFY2013 and 35.5% as of 4QFY2013. The Management targets to increase the CASA ratio to 30%, and increase the share of retail deposits to total deposits to 5560% in the next two years.
July 25, 2013
Exhibit 4: Advances and deposits growth trend

1QFY13 50.0 2QFY13 3QFY13 4QFY13 1QFY14
Exhibit 5: Customer Assets breakup as of 1QFY2014
18 40.0 30.0 19
22.3
20.0
16.4
22.9
23.7
24.3
15.2
18.6
36.2
Advances yoy growth (%)

29.9
10.0
20.2
63
Deposits yoy growth (%)
Corp. and Insti. Banking
Commercial Banking
Branch Banking
Saving deposits continue to witness strong traction

Immediately post the savings rate de-regulation, the bank had aggressively hiked its savings account interest rates, which is leading to a paradigm shift in the banks franchise from a predominantly wholesale franchise to one that will increasingly have much needed retail play as well. Highlighting the strong traction, savings account deposits have grown by more than six times on an absolute basis since the savings deposit rate deregulation in October 2011. Even the share of retail deposits (CASA and retail term deposits) has now risen to 38.8% of total deposits from 35.5% in the last quarter, thereby reducing the banks dependence on higher costing bulk deposits. The share of CDs to total deposits as of 1QFY2014 stands at 10.7%. The bank has almost doubled its branch network in the past two years and has aggressive network expansion plans (an addition of ~100 branches in the remaining nine months of FY2014), which will further its aspirations of creating a sustainable retail deposits franchise, as deposits density is relatively better in tier-I locations, and also keep the bank well on track to meet its version 2.0 branch, CASA, and other growth targets. The bank has also incorporated a retail broking subsidiary to complement its current retail offerings and enable cross selling of 3-in-1 savings accounts to its expanding retail customer base.
July 25, 2013
Exhibit 6: Strong CASA traction continues

(%) 80.0 60.0 40.0 20.0 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
Exhibit 7: CASA ratio improves 123bp sequentially

(%) 22.0 20.2
86.7 71.5 74.9 71.6 61.1
20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 1QFY13 16.3
17.3
18.3
18.9
2QFY13
3QFY13
4QFY13
1QFY14
NIM stable qoq

The banks cost of funds dipped by 10bp sequentially to 8.3% during the quarter, primarily on account of CASA traction. Yield on advances for the bank witnessed a sequential decline of 10bp to 12.3%. Consequently, the NIM for the bank remained stable sequentially at 3.0%.
Exhibit 8: Cost of funds declined largely on CASA traction

(%) 9.0 8.0 7.0 6.0 5.0 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 9.0 8.7 8.5
Exhibit 9: NIM remains stable qoq

(%) 3.1
8.4
8.3
3.0 2.9 2.8 2.7 2.6 2.5 2.4 1QFY13 2.8
3.0 2.9
3.0
3.0
2QFY13
3QFY13
4QFY13
1QFY14
Strong non-interest income growth during 1QFY2014

During 1QFY2014, the banks non-interest income grew strongly by 53.4% yoy to `442cr, as income from the Financial markets segment more than tripled on a yoy basis. The bank realized treasury gains of ~`95cr from sale of government bonds in the quarter under review. Strong growth was witnessed in financial advisory and retail fee income streams, which grew by 20.1% and 19.3% yoy, respectively.
July 25, 2013
Exhibit 10: Income from Financial markets segment more than tripled
Particulars (` cr) Financial markets Financial advisory Transaction banking Retail and others Other income 1QFY14 174 144 88 37 442 4QFY13 72 166 93 49 379 % chg (qoq) 143.2 (13.3) (5.3) (25.5) 16.6 1QFY13 47 120 80 31 277 % chg (yoy) 269.6 20.1 10.8 19.3 59.8
Stability maintained on the Asset quality front

During the quarter, the slippages for the bank remained low at `25cr (annualized slippage rate of 0.2%). Gross NPAs for the bank remained largely stable at 0.22% (on an absolute basis, up by 11.2% qoq). The bank used the opportunity created by higher trading gains during the quarter to make higher provisions (provisioning expenses almost tripled on a yoy basis). The Net NPA ratio at 0.03%, remained well under check. Restructured advances remained under control at 0.29% of gross advances.
Exhibit 11: Asset quality ratios amongst the best in industry

(` cr) 120 100 80 60 40 20 110 24 1QFY13 103 20 2QFY13 76 16 3QFY13 94 7 105 12 1QFY14 70 60 50 78 80 80 80 Gross NPA Net NPA NPA coverage % (RHS) 93 88 100 90
4QFY13
Network expansion continues; Cost ratios under control

The bank added 45 branches in 1QFY2014, taking the total number of branches to 475. It also added 100 ATMs in the quarter, taking the total number of ATMs to 1051. Going ahead, the bank has aggressive plans for network expansion, and is planning to another 100 branches in the remaining nine months of FY2014. For 1QFY2014, the banks cost-to-income ratio came in higher sequentially, but remains well under check at 38.3%. Further, even after considering significant branch expansions plans, the Management expects to contain the cost-to-income ratio below 40%.
July 25, 2013
Exhibit 12: Steady branch network expansion continues

500 450 400 350 300 250 200 150 100 50 475 381 400 412 430
Exhibit 13: Cost ratios remain under control

42.5 40.0 37.5 35.0 32.5 1.2 1.6 1QFY13 1.6 2QFY13 1.6 3QFY13 1.6 4QFY13 1.7 1QFY14 1.0 Opex to avg assets (%, RHS) 39.5 39.5 37.2 37.7 Cost-to-income ratio (%) 1.8 38.3 1.6 1.4
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
30.0
Liquidity tightening measures, in case not temporary, expose bank to margin pressures
RBIs recent liquidity tightening measures, wherein they have capped the LAF borrowing window to 0.5% of banks NDTL and have increased minimum daily CRR requirement from 70% earlier to 99% now, would likely put pressure on funding cost of banks (more for the wholesale funded banks). Yes Bank, though has strategically transformed itself over the last few years from a predominantly wholesale franchise to one that has much needed retail play as well, however, still wholesale deposits form ~61% of total deposits. Consequently, the bank being largely wholesale funded, remains exposed to margins pressures. As per the Management, the net ALM mismatch for the bank upto the one-year maturity bucket prevails at ~`8,000-10,000cr, which is more front loaded. The Management has reiterated its intent to hike lending rates to mitigate the impact, in case these tightening measures are not temporary in nature.
July 25, 2013
Investment arguments
Savings rates deregulation aiding retail customer acquisition
Yes Bank had aggressively hiked savings interest rates immediately post the deregulation, which is leading to a paradigm shift in the banks franchise, ie from a predominantly wholesale franchise to one that will increasingly have a much needed retail play as well. Savings rate deregulation does not allow banks to offer differential rates to different groups of customers. Hence, it would be unfavorable for larger players to offer higher rates to their entire customer base just to protect some amount of market share loss to competition from smaller players such as Yes Bank (more than 33,000 branches and `8lakh cr savings deposits for large banks compared to 475 branches and ~`6,600cr savings deposits for Yes Bank). While the loss in market share for larger players would be minor, the gain for smaller banks, such as Yes Bank offering higher savings rates, is expected to be significant, especially considering the low bases of their retail franchises. Yes Bank continues to experience strong traction in its savings deposits, with SA deposits increasing by more than six times on an absolute basis since the savings deposit rate deregulation in October 2011. Even going forward, we expect the savings deposit accretion for the bank to remain robust, however, over the longer term the opportunity available for banks like Yes Bank to gain market share in savings deposits, could get reduced from the levels envisaged earlier, with the likely entry of new players in the sector over the next couple of years down the line.
A-list Management and ability to raise capital

Yes Bank has an A-list top Management team, which brings to the table rich experience from the best banks in India, including Bank of America, ABN AMRO, Citibank, ICICI Bank, Rabo India and HDFC Bank. The banks performance also benefits from the Managements ability to raise equity capital (at increasing, book-accretive premiums).
Capital raising to be book accretive

The banks capital adequacy ratio (CAR) continues to be strong at 18.1%, with tierI ratio at 9.7% (including 1QFY2014 profits). With RoE of 25% in FY2013 and continued healthy profit run rate so far, the banks retained earnings itself are capable of funding balance sheet growth of 18-20%. The Management had also earlier approved a plan to raise US$500mn equity capital, the timing however would remain subject to market conditions. Any capital raising for the bank is likely to be book-accretive and will aid in further enhancing the bank's credit market share going forward. We have not factored any capital raising in our estimates.
July 25, 2013
Investment Concerns
Asset quality remains strong, but concerns ahead
The bank has maintained strong asset quality in spite of growing at a fast clip over the past few years (credit costs contained at ~35bp for FY2013 and gross and net NPA ratios at a marginal 0.22% and 0.03%, respectively, as of 1QFY2014), which has been aided by the smaller size of its balance sheet so far. The banks PCR (without including technical write-offs) remains strong at 88.5% as of 1QFY2014. The bank has also been astute in managing its growth rate and asset-liability durations, in-line with the changing external environment. Going ahead, the
Management has guided at credit costs for FY2014E to be in the range of 50-60bp and has indicated adversely labeled assets to the tune of 1-2% of loan book, which is likely to reflect in significant increase in provisioning costs for the bank from the current levels.
Medium-term downside risks to RoA

The banks credit market share has steadily increased on the back of a robust credit CAGR of 31.8% over the past five years. The bank has so far managed to source loans with relatively above-average profitability, keeping its NIM above 2.7% since FY2009 (and now at 3%), in spite of a CASA ratio of ~20%. Going forward though, as the size of the balance sheet increases, we believe RoA compression remains a risk to the bank. Having said that, the recent deregulation of savings account rates and the consequent strong accretion of SA deposits for Yes Bank are likely to aid in countering this impact to an extent.
Outlook and valuation

Yes Banks growth as well as its Managements track record has been impeccable so far. On the liabilities side, the bank has a challenge to build a retail deposit franchise, which involves significant execution risks. However, it has taken the challenge head-on and has doubled its branch network over the past two years to 430 branches now. Significant network expansion coupled with aggressive interest rate offering on the savings deposits has resulted in a sevenfold increase in savings deposits base since the deregulation in October 2011. We expect the bank to continue registering robust growth on the retail deposit franchise front, however, with the likely entry of new strong players in the sector, the opportunity for market share gains could get reduced from the levels envisaged earlier. Overall, the bank has performed well so far on the asset quality front, with credit costs contained at ~35bp for FY2013. However going ahead, as per the Managements guidance of 50-60bp credit costs for the current fiscal and adversely labeled assets at ~1-2% of loan book, a significant increase in provisioning costs for the bank could be expected from the current levels. Recent liquidity tightening measures expose Yes Bank to margin pressures given the wholesale dominated funding nature of the bank. The Management has reiterated its intent to hike lending rates to mitigate the impact, in case the measures are not temporary in nature. Moreover on its investment book, as per the Management, currently almost the entire Gsec book is at HTM, therefore no immediate MTM impact, while net MTM impact on aggregate basis on the corporate bond portfolio is largely nil.
July 25, 2013
At the current market price, after the sharp correction recently, the stock trades at a relatively more moderate valuation of 1.6x FY2015E ABV. However, we would prefer to wait and watch macro developments in the near term, before we revisit our outlook and rating on the stock. Currently, we maintain our Neutral rating on the stock.
Exhibit 14: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages
Source: Angel Research
Earlier estimates FY2014 26.0 25.0 24.4 2.8 21.8 30.0 32.5 0.8 FY2015 28.0 26.0 28.2 2.8 23.2 30.0 30.0 1.0
Revised estimates FY2014 26.0 25.0 25.2 2.7 22.5 30.0 33.5 0.8 FY2015 28.0 26.0 29.2 2.8 22.7 28.5 28.5 1.0
Exhibit 15: Change in estimates

FY2014 Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research
Earlier estimates
2,919 1,532 4,451 1,752 2,700 362 2,337 794 1,543
Revised Earlier Var. (%) estimates estimates

2,877 1,540 4,417 1,759 2,659 362 2,297 758 1,539 (1.4) 0.5 (0.8) 0.4 (1.5) (1.7) (4.6) (0.3) 3,638 1,887 5,526 2,277 3,248 546 2,702 919 1,784
FY2015 Revised Var. (%) estimates

3,595 1,890 5,486 2,260 3,226 534 2,691 915 1,777 (1.2) 0.2 (0.7) (0.8) (0.7) (2.2) (0.4) (0.4) (0.4)
July 25, 2013
10
Exhibit 16: P/ABV band

800 700 600 500 400 300 200 100 0 Price (`) 1x 1.5x 2x 2.5x 3x
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Jul-13
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-12
Exhibit 17: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk
#
Reco. Buy Neutral Accumulate Buy Neutral Neutral Neutral Neutral Accumulate Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Accumulate Buy Neutral Neutral Accumulate Neutral Neutral
CMP (`) 1,123 349 660 953 22 383 81 77 590 197 48 298 62 313 64 71 104 47 1,211 164 631 1,803 107 65 147 45 43
Tgt. price (`) 1,348 745 1,160 666 718 2,077 162 -
Upside (%) 20 13 22 13 14 15 11 -
FY2015E P/ABV (x) 1.2 0.8 3.1 1.4 0.8 1.6 0.4 0.5 0.6 0.4 0.5 0.5 0.5 0.4 0.4 0.4 0.4 0.3 0.9 0.3 0.6 1.0 0.5 0.7 0.5 0.3 0.5
FY2015E Tgt. P/ABV (x) 1.5 3.5 1.7 0.7 0.7 1.2 0.5 -
FY2015E P/E (x) 7.1 6.7 14.6 9.6 5.3 7.7 2.4 3.4 4.1 2.9 3.7 3.4 3.3 3.0 2.6 3.2 2.5 2.4 5.8 2.6 3.6 6.3 3.9 4.2 3.1 2.2 4.0
FY2013-15E EPS CAGR (%) 19.1 2.9 26.3 17.4 5.7 16.9 18.3 (0.3) 16.8 21.6 10.0 15.4 52.3 5.7 3.7 25.1 7.0 78.9 (1.7) 17.0 14.5 17.5 (8.5) 67.5 14.7 54.6 9.5
FY2015E RoA (%) 1.6 1.0 1.9 1.6 0.9 1.3 0.7 0.7 0.9 0.7 0.6 0.8 0.6 0.7 0.7 0.8 0.9 0.6 1.2 0.8 1.1 1.0 0.6 0.6 0.7 0.6 0.4
FY2015E RoE (%) 18.1 12.3 22.8 16.2 16.2 22.8 13.6 13.2 16.0 15.1 15.3 14.2 14.3 14.2 14.7 13.3 14.7 13.0 16.8 12.9 16.5 17.0 14.6 13.6 15.2 14.7 11.5
IndBk
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF
July 25, 2013
Nov-13
Mar-14
11
Company Background
Yes Bank is the youngest private sector bank in the country, promoted by professional bankers. The bank started its operations in CY2004 and has been growing at a scorching pace, focusing on niche assets to maintain profitable margins and asset quality. The bank's thrust so far has been primarily on wholesale banking operations for mid-size corporates. Now aiming for a higher share of retail deposits, the bank has recently doubled its network to 430 branches (targeting the urban affluent segment) and is planning to expand its network to 750-900 branches by FY2015.
July 25, 2013
12
Income statement
Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY09 511 54.6 435 20.6 36.9 419 22.7 528 50.7 62 466 52.0 162 34.8 304 51.9 FY10 788 54.1 576 32.3 44.1 500 19.5 863 63.6 137 726 55.9 249 34.2 478 57.2 FY11 1,247 58.2 623 8.3 1,870 37.2 680 35.9 1,190 37.9 98 (28.2) 1,092 50.3 365 33.4 727 52.2 FY12 1,616 29.6 857 37.5 2,473 32.2 933 37.2 1,540 29.4 90 (8.1) 1,450 32.8 473 32.6 977 34.4 FY13E 2,219 37.3 1,258 46.7 3,476 40.6 1,335 43.1 2,142 39.1 216 139.3 1,926 32.8 625 32.5 1,301 33.1 FY14E 2,877 29.7 1,540 22.5 4,417 27.1 1,759 31.8 2,659 24.1 362 67.8 2,297 19.2 758 33.0 1,539 18.3 FY15E 3,595 24.9 1,890 22.7 5,486 24.2 2,260 28.5 3,226 21.3 534 47.5 2,691 17.2 915 34.0 1,777 15.5
946 1,363
41.6 121.6
Balance sheet
Y/E March (` cr) Share Capital Reserves & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY09 297 1,327 16,169 21.8 2,189 1,513 1,405 22,901 1,278 645 7,117 12,403 31.5 131 1,327 22,901 34.8 FY10 340 2,750 26,799 65.7 2,564 2,185 1,745 36,383 1,995 678 10,210 22,193 78.9 115 1,191 36,383 58.9 FY11 347 3,447 45,939 71.4 3,333 3,358 2,583 59,007 3,076 420 18,829 34,364 54.8 132 2,186 59,007 62.2 FY12 353 4,324 49,152 7.0 9,343 4,813 5,677 73,662 2,333 1,253 27,757 37,989 10.5 177 4,153 73,662 24.8 FY13E 359 5,449 66,956 36.2 14,148 6,774 5,419 3,339 727 42,976 47,000 23.7 230 4,833 34.5 FY14E 359 6,717 25.0 18,381 6,604 6,784 3,766 1,838 51,464 59,219 26.0 275 5,976 23.6 FY15E 359 8,181 26.0 22,727 6,439 8,355 4,745 2,273 60,978 75,801 28.0 330 7,389 23.6
83,695 105,455
99,104 122,540 151,516
99,104 122,540 151,516
July 25, 2013
13
Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 2.6 0.3 2.3 0.7 3.0 1.4 4.4 2.1 2.3 0.8 1.5 13.6 20.6 2.7 0.5 2.2 0.3 2.5 1.6 4.1 1.7 2.5 0.8 1.6 12.6 20.3 2.6 0.2 2.4 (0.1) 2.3 1.4 3.7 1.4 2.3 0.8 1.5 13.9 21.1 2.4 0.1 2.3 0.1 2.4 1.2 3.6 1.4 2.2 0.7 1.5 15.7 23.1 2.6 0.2 2.3 0.2 2.5 1.3 3.8 1.5 2.2 0.7 1.5 16.5 24.8 2.6 0.3 2.3 0.1 2.4 1.3 3.7 1.6 2.1 0.7 1.4 17.2 23.9 2.6 0.4 2.2 0.1 2.3 1.3 3.6 1.6 2.0 0.7 1.3 17.6 22.8 37.5 7.1 27.3 4.2 0.4 18.3 3.5 0.7 13.9 2.9 1.0 10.6 2.4 1.6 8.9 1.9 1.7 7.7 1.6 2.0 10.2 53.9 14.1 91.0 1.5 20.9 109.3 2.5 27.7 132.5 4.0 36.3 162.0 6.0 42.9 197.3 6.5 49.5 238.1 7.5 0.7 0.4 0.9 0.3 48.5 0.3 0.1 0.9 0.3 78.4 0.2 0.0 0.2 0.1 88.6 0.2 0.0 0.2 0.0 79.2 0.2 0.0 0.6 0.2 92.6 0.5 0.1 0.8 0.3 84.2 1.0 0.2 1.0 0.3 80.0 8.7 76.7 16.6 9.5 10.5 82.8 20.6 12.9 10.3 74.8 16.5 9.7 15.0 77.3 17.9 9.9 21.3 70.2 18.3 9.5 25.2 70.8 16.2 9.1 29.2 71.9 14.4 8.7 2.7 44.2 1.5 20.6 2.8 36.7 1.6 20.3 2.7 36.3 1.5 21.1 2.6 37.7 1.5 23.1 2.7 38.4 1.5 24.8 2.7 39.8 1.4 23.9 2.8 41.2 1.3 22.8 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
July 25, 2013
14
Research Team Tel: 022 - 39357800
E-mail: research@angelbroking.com
Website: www.angelbroking.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Yes Bank No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%) Reduce (-5% to -15%)
Accumulate (5% to 15%) Sell (< -15%)
Neutral (-5 to 5%)
July 25, 2013
15

Yes Bank - 1QFY2014 Result Update

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Yes Bank - 1QFY2014 Result Update

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1QFY2014 Result Update | Banking

July 25, 2013

Particulars (` cr) NII Pre-prov. profit PAT

1QFY14 659 680 401

4QFY13 638 634 362

Source: Company, Angel Research

Banking 13,790 1.2 547/322 315,039 10 20,091 5,991 YESB.BO YES@IN

Abs. (%) Sensex YES

1yr 18.8 12.3

3yr 10.8 27.0

Source: Company, Angel Research, CMP as of July 24, 2013

Please refer to important disclosures at the end of this report