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Yes Bank
Key highlights of 3QFY11 and what can be expected for the rest of FY11
YES beat our EPS estimate by 11% on in-line growth in 3QFY11, lower opex and lower
NPL provisions.
1 Loan book growth was 66% y-y. CASA ratio stagnant at 10.2%, despite 81% y-y
growth on higher balance sheet growth. Fourteen branches were added during the
quarter. YES expects to take branch count to 250 by June 2011 from 185 at
present. We expect an increase in branch density from 60-70%, with new branches
coming up in tier-1-2 cities to start adding meaningfully to CASA ratio beyond
2HFY12. Thirty of these branches are close to being operationalised.
2 YES attributed NIM compression during the quarter to the lag in repricing of assets
to the liabilities. The bank expects NIMs to improve to 2.9% by 4QFY11 and move
up to 3% by FY12 as the liquidity situation eases off, benefits from loan and
investment book repricing flows through and CASA ratio begins to inch up. Yes
maintained its cost-income ratio at a sector-leading 36%, despite increasing the
employee base by 21% y-y.
3 YES reported GNPL and NNPL ratios of 23bp and 6bp respectively for 3QFY11,
stating that only one SME account had slipped during the quarter. YES reported no
overdue account in its MFI book (0.94% of total loans). Yes disclosed that it had no
exposure to recent telecom auctions and it had 7.6% exposure to top telecom
companies. Its commercial real estate exposure stood at around 3%, with no
slippages at present. Restructured loans were 27bp of overall book.
For FY11 we expect loan growth of 48% as compared to management guidance of
60%, NIM compression to 2.66% for 4QFY10 (against management guidance of 2.8-
2.9%) and LLPs of 9bps.
What to expect in FY12 : Building a stress case scenario
We are budgeting for loan growth of 39%, we are factoring in a 60bp decline in NIM to
2.36%. e are taking cost-income ratio to 41% for fY12 from 37% in FY11 and we are
increasing LLPs to 23bp from 6bps in FY11. All these add up to a 10% decline in our
earnings estimate for FY12.
Valuation: We have cut our TP to INR325 (from INR390), implying a FY12E P/BV of
2.6x (from 3.1x earlier). The stock trades at 1.9x our FY12E adjusted BV for adjusted
ROE of 18.5%. Our TP is based on a three-stage residual income model, which
assumes a risk-free rate of 8.25%, equity risk premium of 6%, terminal growth rate of
4% and beta of 1.1. Key risks to TP are: higher than expected NIM compression and
LLPs and slower than expected execution of branch network expansion.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank
Key highlights of 3QFY11 and what can be expected for the rest of FY11
YES beat our EPS estimate by 11% on in-line growth in 3QFY11, lower opex and lower
NPL provisions.
1 Loan book growth was 66% y-y. CASA ratio stagnant at 10.2%, despite 81% y-y
growth on higher balance sheet growth. Fourteen branches were added during the
quarter. YES expects to take branch count to 250 by June 2011 from 185 at
present. We expect an increase in branch density from 60-70%, with new branches
coming up in tier-1-2 cities to start adding meaningfully to CASA ratio beyond
2HFY12. Thirty of these branches are close to being operationalised.
2 YES attributed NIM compression during the quarter to the lag in repricing of assets
to the liabilities. The bank expects NIMs to improve to 2.9% by 4QFY11 and move
up to 3% by FY12 as the liquidity situation eases off, benefits from loan and
investment book repricing flows through and CASA ratio begins to inch up. Yes
maintained its cost-income ratio at a sector-leading 36%, despite increasing the
employee base by 21% y-y.
3 YES reported GNPL and NNPL ratios of 23bp and 6bp respectively for 3QFY11,
stating that only one SME account had slipped during the quarter. YES reported no
overdue account in its MFI book (0.94% of total loans). Yes disclosed that it had no
exposure to recent telecom auctions and it had 7.6% exposure to top telecom
companies. Its commercial real estate exposure stood at around 3%, with no
slippages at present. Restructured loans were 27bp of overall book.
For FY11 we expect loan growth of 48% as compared to management guidance of
60%, NIM compression to 2.66% for 4QFY10 (against management guidance of 2.8-
2.9%) and LLPs of 9bps.
What to expect in FY12 : Building a stress case scenario
We are budgeting for loan growth of 39%, we are factoring in a 60bp decline in NIM to
2.36%. e are taking cost-income ratio to 41% for fY12 from 37% in FY11 and we are
increasing LLPs to 23bp from 6bps in FY11. All these add up to a 10% decline in our
earnings estimate for FY12.
Valuation: We have cut our TP to INR325 (from INR390), implying a FY12E P/BV of
2.6x (from 3.1x earlier). The stock trades at 1.9x our FY12E adjusted BV for adjusted
ROE of 18.5%. Our TP is based on a three-stage residual income model, which
assumes a risk-free rate of 8.25%, equity risk premium of 6%, terminal growth rate of
4% and beta of 1.1. Key risks to TP are: higher than expected NIM compression and
LLPs and slower than expected execution of branch network expansion.
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