Visit http://indiaer.blogspot.com/ for complete details YESB.BO, Yes Bank (Rs352.15) /F2Q11: Strong Volumes Drive Earnings Growth
Yes Bank reported F2Q11 profits of Rs1.76 bn
(+13% QoQ, +58% YoY). Our expectation was Rs1.65
bn. On a per-share basis (given equity issuance), EPS
was up 7% QoQ and 31% YoY.
Strong volumes offset the margin compression –
driving 19% QoQ NII growth: Loan book expanded by
16% QoQ and 86% YoY. Deposit growth was faster at
32% QoQ and 107% YoY (however, part of the deposit
growth was temporary in nature). NIMs compressed 10
bps QoQ to 3%. Rising funding costs were partly offset
by higher yield on investments.
Fee income was weak… Non-interest income
(excluding capital gains) was down 9% QoQ but up 14%
YoY. While the trends this quarter were weak,
management expects this segment to start picking up
over the next few quarter.
…but cost control provided an offset: Total costs
grew by only 4% QoQ and 36% YoY, lagging both total
income and asset growth. As a result, the cost to assets
ratio fell 22 bps QoQ, helping offset the 25 bps fall in
fees to assets.
CASA ratio moved lower: Low-cost deposits (CASA)
grew by 27% QoQ while term deposits grew by 33%
QoQ. CASA/deposits moved lower by 40 bps QoQ to
10.1%. However, a part of the decline stemmed from the
temporary rise in fixed deposits.
Maintain OW; raising estimates, PT: Our price target
rises 4.6% to Rs455, reflecting higher earnings
estimates. The stock trades at 12.5x F12e earnings and
2.2x BV. We believe asset aggregators like Yes Bank
remain in a sweet spot; funding cost pressures are
unlikely to intensify even as growth remains strong.
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