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Yes Bank: Higher funding cost impacts NII growth…
Yes Bank reported PAT of | 203 crore in line with our estimate of | 207
crore. The disappointment came in from NII growth, which was well
below our estimates. Higher deposit rates and faster branch addition led
to higher deposit growth of 71% YoY to | 45940 crore (up 16% QoQ). The
loan book grew 55% YoY to | 34363 crore, thus moderating the CD ratio
to 75%. Cost of funds jumped 70 bps QoQ, 150 bps YoY to 7.8%. YoA (at
10.7%) was up 100 bps YoY, 70 bps QoQ. Thus, NIM was maintained
QoQ at 2.8%, showing the loan book shored up at fag end of the quarter.
Non interest income grew faster QoQ
Non interest income growth, which was subdued in H1FY11, picked up
pace in H2FY11 and closed the year with moderate 11% YoY growth.
For Q4FY11, it was up 17% YoY, 16% QoQ to | 187 crore. Core fee
based income (financial advisory) picked up pace and grew 44% QoQ
and 34% YoY to | 77 crore. We have modelled in 19% CAGR in non
interest income over FY10-13E to | 809 crore. This growth in non
interest income helped the bank to keep the cost income ratio at 35%
for FY11 despite 65 new branches being added during the year. The
bank is well on course to reach 250 branches by June 2011. This will
enable it to unfold the retail version.
Version 2 story to support NIM ahead
Yes Bank, which primarily started as a wholesale bank and grew
aggressively, is unable to pass on higher interest cost after a certain
extent. We envisage that the retail version needs to pick up pace for the
bank to maintain NIM of 3% in the coming period. We expect 2.9% NIM
in FY13E and expect an improvement, thereafter, as the retail proportion
of loan book gains more weight on the back of higher branch rollout.
Valuation
We are rolling over our multiple to FY13E. We have factored in 5% equity
dilution both in FY12E and FY13E, thereby moderating the RoE marginally
to 20% in FY13E. We value the bank at 2.2x FY13E ABV (2.8x FY12E ABV)
and have assigned a fair value of | 398 to the bank. The downside risk to
our call would be sustained higher interest rate, which would not allow
the NIM expansion that we have factored in.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank: Higher funding cost impacts NII growth…
Yes Bank reported PAT of | 203 crore in line with our estimate of | 207
crore. The disappointment came in from NII growth, which was well
below our estimates. Higher deposit rates and faster branch addition led
to higher deposit growth of 71% YoY to | 45940 crore (up 16% QoQ). The
loan book grew 55% YoY to | 34363 crore, thus moderating the CD ratio
to 75%. Cost of funds jumped 70 bps QoQ, 150 bps YoY to 7.8%. YoA (at
10.7%) was up 100 bps YoY, 70 bps QoQ. Thus, NIM was maintained
QoQ at 2.8%, showing the loan book shored up at fag end of the quarter.
Non interest income grew faster QoQ
Non interest income growth, which was subdued in H1FY11, picked up
pace in H2FY11 and closed the year with moderate 11% YoY growth.
For Q4FY11, it was up 17% YoY, 16% QoQ to | 187 crore. Core fee
based income (financial advisory) picked up pace and grew 44% QoQ
and 34% YoY to | 77 crore. We have modelled in 19% CAGR in non
interest income over FY10-13E to | 809 crore. This growth in non
interest income helped the bank to keep the cost income ratio at 35%
for FY11 despite 65 new branches being added during the year. The
bank is well on course to reach 250 branches by June 2011. This will
enable it to unfold the retail version.
Version 2 story to support NIM ahead
Yes Bank, which primarily started as a wholesale bank and grew
aggressively, is unable to pass on higher interest cost after a certain
extent. We envisage that the retail version needs to pick up pace for the
bank to maintain NIM of 3% in the coming period. We expect 2.9% NIM
in FY13E and expect an improvement, thereafter, as the retail proportion
of loan book gains more weight on the back of higher branch rollout.
Valuation
We are rolling over our multiple to FY13E. We have factored in 5% equity
dilution both in FY12E and FY13E, thereby moderating the RoE marginally
to 20% in FY13E. We value the bank at 2.2x FY13E ABV (2.8x FY12E ABV)
and have assigned a fair value of | 398 to the bank. The downside risk to
our call would be sustained higher interest rate, which would not allow
the NIM expansion that we have factored in.
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