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YES BANK HOLD
RICH VALUATIONS; DOWNGRADE TO HOLD
• Yes Bank reported strong earnings in 4Q with net profit at INR 2.04bn (higher
than our as well as consensus estimates) on the back of robust growth in
advances, higher other income (from financial advisory and transaction
banking) and strong NII growth.
• After a muted third quarter, loan growth for the bank rebounded at 55% YoY
and 10% QoQ in 4QFY11 driven by agri, engineering and infrastructure
segments. Contrary to expectations, margins for the bank were stable at
2.8% in 4Q despite high wholesale rates and lower CD ratio due to hike in
lending rates (both base rate and PLR in 4Q and early April). Management is
guiding towards a loan growth of ~35% for FY12e (2x of system growth),
while margins could see a marginal uptick in 1QFY12e.
• Absolute CASA for the bank showed some traction at 17.6% QoQ, but CASA
ratio continued to languish at 10.3%. Benefit of CASA accretion still not
visible given high growth strategy employed by the bank. Management
continues to focus on branch addition (25 branches added during the
quarters; branch network at 214) and hiring employees in sales to augment
CASA accretion. (900 employees hired in FY11, taking total employee
strength to 3,785).
• GNPA and NNPA ratios continued to remain stable with GNPA and NNPA at
0.23% and 0.03% for 4QFY11, respectively. Total restructured advances for
the bank stands 0.24% of the gross advances. Concerns on telecom and MFI
exposure of the bank are overdone. The bank has run down its exposure in
the telecom sector by 300bps to 5.7%.
• Yes Bank has significantly outperformed the bankex over the last two months
as street expectations of short term interest rates and liquidity easing in
1QFY12 has clearly played out. However, current valuations at 2.4x FY12E
P/BV and 13.4x FY12E P/e look a little stretched given uncertain macro and
high inflation. We maintain our estimates and target price of INR330, but
downgrade our recommendation to HOLD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
YES BANK HOLD
RICH VALUATIONS; DOWNGRADE TO HOLD
• Yes Bank reported strong earnings in 4Q with net profit at INR 2.04bn (higher
than our as well as consensus estimates) on the back of robust growth in
advances, higher other income (from financial advisory and transaction
banking) and strong NII growth.
• After a muted third quarter, loan growth for the bank rebounded at 55% YoY
and 10% QoQ in 4QFY11 driven by agri, engineering and infrastructure
segments. Contrary to expectations, margins for the bank were stable at
2.8% in 4Q despite high wholesale rates and lower CD ratio due to hike in
lending rates (both base rate and PLR in 4Q and early April). Management is
guiding towards a loan growth of ~35% for FY12e (2x of system growth),
while margins could see a marginal uptick in 1QFY12e.
• Absolute CASA for the bank showed some traction at 17.6% QoQ, but CASA
ratio continued to languish at 10.3%. Benefit of CASA accretion still not
visible given high growth strategy employed by the bank. Management
continues to focus on branch addition (25 branches added during the
quarters; branch network at 214) and hiring employees in sales to augment
CASA accretion. (900 employees hired in FY11, taking total employee
strength to 3,785).
• GNPA and NNPA ratios continued to remain stable with GNPA and NNPA at
0.23% and 0.03% for 4QFY11, respectively. Total restructured advances for
the bank stands 0.24% of the gross advances. Concerns on telecom and MFI
exposure of the bank are overdone. The bank has run down its exposure in
the telecom sector by 300bps to 5.7%.
• Yes Bank has significantly outperformed the bankex over the last two months
as street expectations of short term interest rates and liquidity easing in
1QFY12 has clearly played out. However, current valuations at 2.4x FY12E
P/BV and 13.4x FY12E P/e look a little stretched given uncertain macro and
high inflation. We maintain our estimates and target price of INR330, but
downgrade our recommendation to HOLD.
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