Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank -Loan growth moderates
In 3QFY11, Yes Bank’s profit grew by 52% YoY to Rs1.9bn, ahead of our
estimates due to lower provisioning costs. The moderation in loan growth
to 66% YoY (3% QoQ) indicates the focus on profitability over growth as
the sharp rise in cost of wholesale funds is putting pressure on margins.
During the quarter, margins contracted by 20bps QoQ to 2.8%, but
management does not expect them to fall further. Stable asset quality
was positive, but CASA ratio has been flat for 6 quarters. We expect 33%
Cagr in profit over FY10-13CL. Maintain BUY.
Loan growth moderates
During 3QFY11, Yes Bank’s loan growth moderated to 66% YoY from 86% in
Sep-10. On a sequential basis its loan growth of 3% was lower than sector’s
growth of 10%. We believe that the moderation in asset growth reflects on
management’s preference on profitability (margins) and asset quality (higher
yielding loans may pose asset quality risks). Management expects some pickup
in loan growth in 4QFY11 led by pipeline of new sanctions and lending
towards priority sector targets.
Margins contract, but unlikely to fall further
During 3QFY11, bank’s spreads on loans expanded by 10bps to 2.9% led by
repricing of loan yields more than increase in cost of funds. However, NIMs
contracted by 20bps QoQ (30bps YoY) to 2.8% due to increase in leverage
and lag in repricing of investment book. Management believes that margins
have bottomed and rise in cost of funds would be offset by upward repricing
of investment book. While the growth in CASA deposits is impressive (up 81%
YoY), CASA ratio has been stable at ~10% over past 6 quarters. We believe
that improvement in the CASA ratio is critical, especially in a rising interest
rate scenario.
Asset quality trends were encouraging
During 3QFY11, asset quality was fairly stable with gross NPLs growing by
34% YoY (8% QoQ) to 23bps of loans; coverage ratio improved by 600bps
YoY to 76%. Management’s clarification that bank has nil exposure to the new
2G telecom licensees and that its exposure to micro-finance institutions (<1%
of loans) has not seen any overdue as yet was encouraging.
Maintain BUY
We expect Yes’ earnings to grow at 33% Cagr over FY10-13CL, led by loan
growth. With stock trading below its five year average PB, easing liquidity
conditions and interest rates may drive some outperformance. Maintain BUY
with target price of Rs350, based on 2.5x forward adjusted PB.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank -Loan growth moderates
In 3QFY11, Yes Bank’s profit grew by 52% YoY to Rs1.9bn, ahead of our
estimates due to lower provisioning costs. The moderation in loan growth
to 66% YoY (3% QoQ) indicates the focus on profitability over growth as
the sharp rise in cost of wholesale funds is putting pressure on margins.
During the quarter, margins contracted by 20bps QoQ to 2.8%, but
management does not expect them to fall further. Stable asset quality
was positive, but CASA ratio has been flat for 6 quarters. We expect 33%
Cagr in profit over FY10-13CL. Maintain BUY.
Loan growth moderates
During 3QFY11, Yes Bank’s loan growth moderated to 66% YoY from 86% in
Sep-10. On a sequential basis its loan growth of 3% was lower than sector’s
growth of 10%. We believe that the moderation in asset growth reflects on
management’s preference on profitability (margins) and asset quality (higher
yielding loans may pose asset quality risks). Management expects some pickup
in loan growth in 4QFY11 led by pipeline of new sanctions and lending
towards priority sector targets.
Margins contract, but unlikely to fall further
During 3QFY11, bank’s spreads on loans expanded by 10bps to 2.9% led by
repricing of loan yields more than increase in cost of funds. However, NIMs
contracted by 20bps QoQ (30bps YoY) to 2.8% due to increase in leverage
and lag in repricing of investment book. Management believes that margins
have bottomed and rise in cost of funds would be offset by upward repricing
of investment book. While the growth in CASA deposits is impressive (up 81%
YoY), CASA ratio has been stable at ~10% over past 6 quarters. We believe
that improvement in the CASA ratio is critical, especially in a rising interest
rate scenario.
Asset quality trends were encouraging
During 3QFY11, asset quality was fairly stable with gross NPLs growing by
34% YoY (8% QoQ) to 23bps of loans; coverage ratio improved by 600bps
YoY to 76%. Management’s clarification that bank has nil exposure to the new
2G telecom licensees and that its exposure to micro-finance institutions (<1%
of loans) has not seen any overdue as yet was encouraging.
Maintain BUY
We expect Yes’ earnings to grow at 33% Cagr over FY10-13CL, led by loan
growth. With stock trading below its five year average PB, easing liquidity
conditions and interest rates may drive some outperformance. Maintain BUY
with target price of Rs350, based on 2.5x forward adjusted PB.
No comments:
Post a Comment