Yes Bank 4QFY11 - strong and inline results:: Standard Chartered Research,

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 Yes Bank reported strong loan and deposit growth,
stable NIMs and substantial increase in loan loss cover.
 We maintain our UNDERWEIGHT rating on Yes Bank
as we are concerned about its low CASA in a rising rate
environment.
 We believe Yes Bank’s key productivity parameters
have peaked.
 We maintain our earnings and price target of Rs310.
The bank plans to raise a maximum of US$500m over
the next 12-15 months.
NIMs – Loans grew a strong 10% qoq and 55% yoy. Loans
under commercial and corporate banking grew 44% yoy and
8% qoq. Loans under branch banking grew 251% yoy and
31% qoq. NIM remained stable qoq at 2.8%. With stable
NIMs and high loan growth, NII grew a strong 43% yoy and
8% qoq.
Lower CD ratio a positive – While loans grew strongly,
deposit growth of 71% yoy and 16% qoq outpaced loan
growth, which helped lower the CD ratio. The CD ratio
declined to 75% in 4Q from 79% in 3Q. A lower CD ratio is
positive given the RBI’s discomfort with high (75% plus) CD
ratios.
C/I ratio at 34.8% – The bank added 29 branches in 4Q.
The cost to income ratio at 34.8% is lower than 35.8% in 3Q
and is amongst the lowest in the sector.
Asset quality remains robust – Gross NPLs rose 11% qoq
on a low base. The bank made huge provisions during the
quarter, which is why net NPLs declined qoq. At 0.03% of
loans, net NPLs for Yes Bank are the lowest in the sector.
Non-interest income grew strongly – Sequential growth in
non-interest income was strong at 16% qoq. The growth in
non-interest income was led by advisory and transaction
banking. Income from financial markets was weak due to
realized trading losses.
MFI exposure reduces – The bank has reduced its MFI
exposure to Rs2.5bn in 4Q11 from Rs2.9bn in 3Q11. All
loans are standard and paying on time as of 4Q.