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YES BANK
OUTPERFORMER (RS236, MCAP: RS80BN / US$1.7BN)
• Front-ended growth in FY11; focus on SME segment: Yes Bank’s management has indicated that loan growth in
FY11 is expected to be front-loaded due to rising interest rates and tight liquidity. It is targeting loan growth of 60% in
FY11 and 30% in FY11. SME loans are expected to be the main driver of growth. The bank aims to increase its
proportion from 10% of the loan book currently to ~30% by FY15. The bank is also targeting a loan mix of 40:30:30 for
the large, mid and small corporate loans by FY15.
• Margins to stay stable: A sharp rise in wholesale interest rates resulted in a 20bp qoq decline in Yes bank’s margins in
Q3FY11. However, the management expects short-term interest rates to trend downwards in the near term, which,
along with the recent rise in lending rates, is expected to keep margins stable at 2.7-2.8% in the near term. The
company expects to maintain margins at 3% in FY12.
• Healthy asset quality; low exposure to sensitive sectors: Yes Bank has been able to maintain it asset quality to date –
gross NPA of 0.23% and net NPA of 0.06% as of Q3FY11. The company is confident of maintaining robust asset
quality standards. Regarding exposure to sensitive sectors, the management indicated that the bank has zero exposure
to new 2G telecom players and low (2.5% of advances) exposure to the real estate segment. The bank has a small
Rs29bn (~1% of total advances) exposure to the MFI segment and expects a part of it to get restructured in FY12.
Overall, despite the potential stress in the MFI portfolio, total provisions in FY11 and FY12 are expected to be less than
in FY10.
• Building a strong liability base: Deposits generated through branch network currently contribute a relatively low
proportion (~25%) to Yes Bank’s total deposit base. In order to fortify its liability base, the management plans to
increase this to ~35% of the total deposit base by FY12 and ~50% by FY15. Expansion of branch network and
leveraging of its existing client base are expected to drive this growth. The bank aims to open ~65 branches over the
next two quarters (+250 by June 2011) and reach a branch network of 300+ branches by FY12.
• Fee income to gain traction: Yes Bank reported strong growth in fee income in Q3FY11 with the impetus being led by
transaction banking and financial market fees. Going forward, the management aims to increase the size of its nonfund
exposure, which, along with expanding branch network, should provide significant traction to trade, guarantee
and transaction banking fees. Financial advisory fees (especially IB revenues) are also expected to remain robust.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
YES BANK
OUTPERFORMER (RS236, MCAP: RS80BN / US$1.7BN)
• Front-ended growth in FY11; focus on SME segment: Yes Bank’s management has indicated that loan growth in
FY11 is expected to be front-loaded due to rising interest rates and tight liquidity. It is targeting loan growth of 60% in
FY11 and 30% in FY11. SME loans are expected to be the main driver of growth. The bank aims to increase its
proportion from 10% of the loan book currently to ~30% by FY15. The bank is also targeting a loan mix of 40:30:30 for
the large, mid and small corporate loans by FY15.
• Margins to stay stable: A sharp rise in wholesale interest rates resulted in a 20bp qoq decline in Yes bank’s margins in
Q3FY11. However, the management expects short-term interest rates to trend downwards in the near term, which,
along with the recent rise in lending rates, is expected to keep margins stable at 2.7-2.8% in the near term. The
company expects to maintain margins at 3% in FY12.
• Healthy asset quality; low exposure to sensitive sectors: Yes Bank has been able to maintain it asset quality to date –
gross NPA of 0.23% and net NPA of 0.06% as of Q3FY11. The company is confident of maintaining robust asset
quality standards. Regarding exposure to sensitive sectors, the management indicated that the bank has zero exposure
to new 2G telecom players and low (2.5% of advances) exposure to the real estate segment. The bank has a small
Rs29bn (~1% of total advances) exposure to the MFI segment and expects a part of it to get restructured in FY12.
Overall, despite the potential stress in the MFI portfolio, total provisions in FY11 and FY12 are expected to be less than
in FY10.
• Building a strong liability base: Deposits generated through branch network currently contribute a relatively low
proportion (~25%) to Yes Bank’s total deposit base. In order to fortify its liability base, the management plans to
increase this to ~35% of the total deposit base by FY12 and ~50% by FY15. Expansion of branch network and
leveraging of its existing client base are expected to drive this growth. The bank aims to open ~65 branches over the
next two quarters (+250 by June 2011) and reach a branch network of 300+ branches by FY12.
• Fee income to gain traction: Yes Bank reported strong growth in fee income in Q3FY11 with the impetus being led by
transaction banking and financial market fees. Going forward, the management aims to increase the size of its nonfund
exposure, which, along with expanding branch network, should provide significant traction to trade, guarantee
and transaction banking fees. Financial advisory fees (especially IB revenues) are also expected to remain robust.
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