Yes bank Ltd-Q3FY11 Earnings Updates (Keynote Capitals)

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Q3-FY11 earnings updates on Yes Bank Ltd.

Yes Bank has delivered another successful quarter of financial performance despite heightened event risks and market volatility. The stable net interest income and sustained fee income growth enhance the relationships in Corporate Segments of the bank. The bank has reported highest ever Net Profit up by 52% at Rs191.12cr in the 3QFY11 and outperformed the market expectations. Growth in NII was healthy at Rs323.16cr up by 53%, mainly on account of robust growth in the advances book. Further, the other income increased by 27% at Rs161.67cr and 40 bps dip in the cost to income ratio has led 44% jump in the operating profit at Rs311.25cr and 52% growth in Net Profit on y-o-y basis.

Developments during the quarter

Ø  The bank has total branches of 185 across 149 cities as of Dec-10. It added 14 new branches across 8 locations during the 3QFY11 and an additional 9 branches under progress along with two National Operating Centres in Mumbai and Gurgaon. It has also expanded its Corporate Offices in Mumbai, New Delhi, Chennai, Bangalore and Kolkata.

Ø  Signed a Memorandum of Understanding with Shinsei Bank Limited, a leading diversified financial institution in Japan to advise Indian and Japanese companies on cross-border deals between the two countries.

Ø  Entered into a strategic partnership with National Collateral Management Services Limited (NCMSL), a major agri-infrastructure player, for collateral management and warehousing services.

Valuation & Recommendation

Considering the above factors, we arrive at a target price of Rs338 per share by assigning a multiple of 2.65x FY12E price to adjusted book for the period of one year, with a ‘Buy’ recommendation. At CMP of Rs270.35 the stock is trading at 2.98x FY10 price to adjusted book and is expected to trade at 2.57xFY11E and 2.11xFY12E price to adjusted book.