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Yes Bank -------------------------------------------------------------------- Maintain UNDERPERFORM
Growth moderates, margins under pressure
● Yes Bank’s 3Q profit (+52% YoY) was 10% ahead of our and the
street’s estimates, primarily led by a higher other income
● The weakness of its wholesale funded model was visible, as
during the quarter margins dropped 20 bp QoQ (to 2.8%), despite
the bank dramatically slowing asset growth (loan growth was at
3% QoQ) on account of the tight liquidity and a sharp rise in
wholesale funding rates. We expect the upward bias on deposit
rates to continue and margins to stay under pressure even in the
coming quarters
● CASA growth (0% QoQ) disappointed during the quarter and the
share of CASA remained low at 10.2%. While the bank is on track
with its branch addition plans (250 by Jun-11), we believe there
are at least a few more quarters before we start realising
significant improvements in CASA
● While the stock has fallen 21% over past three months, it is still
trading at 2.1x FY12E book, which is not at a big discount to other
private banks such as ICICI (1.9x FY12E BV) and Axis (2.5x
FY12E BV) that already have a well-developed deposit franchise
(40% CASA versus 10% for Yes).
Growth moderates, margins under pressure
Loan growth for the bank moderated to 3% QoQ (66% YoY), driven by
the tight liquidity conditions, rising cost of funds and the bank having
had a robust 1H11 (37% HoH growth). Management maintained FY11
loan growth guidance of 60% YoY and FY12 growth of 45-50%.
However, we believe there are downside risks to FY12 growth targets.
Net interest margin was down 20 bp QoQ to 2.8%, driven by higher
cost of funds and higher share of investment book, and we expect
NIM to stay under pressure in the coming quarters as well.
Deposit growth was weak at -1% QoQ (79% YoY) and the share of
CASA remains low at 10.2%. Absolute CASA growth disappointed
during the quarter at 0% QoQ. The bank added 14 branches during
the quarter (currently 185 branches) and is confident about reaching
250 branches by Jun-11. Non-interest income was higher than
expected (23% QoQ; 27% YoY), but continues to lag asset growth
(1.3% of assets versus 1.8% a year ago). Asset quality remained
healthy with gross NPLs at 0.2% and coverage at 76%. Total MFI
exposure is at 0.9% of loans (Rs2.9 bn), but the bank indicated all
these loans are standard assets (with no overdue).
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank -------------------------------------------------------------------- Maintain UNDERPERFORM
Growth moderates, margins under pressure
● Yes Bank’s 3Q profit (+52% YoY) was 10% ahead of our and the
street’s estimates, primarily led by a higher other income
● The weakness of its wholesale funded model was visible, as
during the quarter margins dropped 20 bp QoQ (to 2.8%), despite
the bank dramatically slowing asset growth (loan growth was at
3% QoQ) on account of the tight liquidity and a sharp rise in
wholesale funding rates. We expect the upward bias on deposit
rates to continue and margins to stay under pressure even in the
coming quarters
● CASA growth (0% QoQ) disappointed during the quarter and the
share of CASA remained low at 10.2%. While the bank is on track
with its branch addition plans (250 by Jun-11), we believe there
are at least a few more quarters before we start realising
significant improvements in CASA
● While the stock has fallen 21% over past three months, it is still
trading at 2.1x FY12E book, which is not at a big discount to other
private banks such as ICICI (1.9x FY12E BV) and Axis (2.5x
FY12E BV) that already have a well-developed deposit franchise
(40% CASA versus 10% for Yes).
Growth moderates, margins under pressure
Loan growth for the bank moderated to 3% QoQ (66% YoY), driven by
the tight liquidity conditions, rising cost of funds and the bank having
had a robust 1H11 (37% HoH growth). Management maintained FY11
loan growth guidance of 60% YoY and FY12 growth of 45-50%.
However, we believe there are downside risks to FY12 growth targets.
Net interest margin was down 20 bp QoQ to 2.8%, driven by higher
cost of funds and higher share of investment book, and we expect
NIM to stay under pressure in the coming quarters as well.
Deposit growth was weak at -1% QoQ (79% YoY) and the share of
CASA remains low at 10.2%. Absolute CASA growth disappointed
during the quarter at 0% QoQ. The bank added 14 branches during
the quarter (currently 185 branches) and is confident about reaching
250 branches by Jun-11. Non-interest income was higher than
expected (23% QoQ; 27% YoY), but continues to lag asset growth
(1.3% of assets versus 1.8% a year ago). Asset quality remained
healthy with gross NPLs at 0.2% and coverage at 76%. Total MFI
exposure is at 0.9% of loans (Rs2.9 bn), but the bank indicated all
these loans are standard assets (with no overdue).
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