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Given Yes Bank’s robust growth in advances over the initial years (at a CAGR of 54% over FY07-11), the management
expects to sustain the growth momentum with a targeted growth of 35% CAGR in advances over FY11-15. The
Version 2.0 marks more diversified growth with increased focus on high yielding SME and retail segments.
The net interest margin (NIM) is expected to decline in the rising interest rate scenario, though not substantially
due to the strong re-pricing power on the assets side (about 95% of the assets are on floating rates) and
favourable asset liability duration. The management believes that increasing the branch tally to 350-450 (350
branches by June 2012) would be the inflection point and there will be an exponential growth in the deposits
(including CASA), which would support the margins.
Yes Bank maintains the best asset quality in the industry with the lowest NPAs (gross NPAs at 0.23% and net
NPAs at 0.03% in FY11). Hence, we do not expect any significant deterioration in asset quality. The bank’s total
exposure to microfinance institutions (MFIs) is less than 1% of the loan book (ie Rs250 crore) and the portfolio
continues to do well.
Yes Bank’s return ratios have consistently remained at higher levels (18-20%) despite several rounds of equity
infusion. We believe the bank will maintain its RoEs and RoAs at about 20% and 1.4% respectively over the next
two years led by a 28% CAGR in its earnings.
While the advances growth is likely to moderate from the current levels (52% CAGR over FY07-11), it would
substantially be higher than the industry’s, which would result in a strong growth in the earnings. We expect
Yes Bank’s advances to grow at a CAGR of 38% over FY11-13, leading to an approximately 28% growth in the
earnings. Currently, the stock is trading at 1.9x FY12 BV and 1.6x FY13 BV. We maintain Buy rating on the stock
with a price target of Rs415 (2.7x FY12 BV).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Given Yes Bank’s robust growth in advances over the initial years (at a CAGR of 54% over FY07-11), the management
expects to sustain the growth momentum with a targeted growth of 35% CAGR in advances over FY11-15. The
Version 2.0 marks more diversified growth with increased focus on high yielding SME and retail segments.
The net interest margin (NIM) is expected to decline in the rising interest rate scenario, though not substantially
due to the strong re-pricing power on the assets side (about 95% of the assets are on floating rates) and
favourable asset liability duration. The management believes that increasing the branch tally to 350-450 (350
branches by June 2012) would be the inflection point and there will be an exponential growth in the deposits
(including CASA), which would support the margins.
Yes Bank maintains the best asset quality in the industry with the lowest NPAs (gross NPAs at 0.23% and net
NPAs at 0.03% in FY11). Hence, we do not expect any significant deterioration in asset quality. The bank’s total
exposure to microfinance institutions (MFIs) is less than 1% of the loan book (ie Rs250 crore) and the portfolio
continues to do well.
Yes Bank’s return ratios have consistently remained at higher levels (18-20%) despite several rounds of equity
infusion. We believe the bank will maintain its RoEs and RoAs at about 20% and 1.4% respectively over the next
two years led by a 28% CAGR in its earnings.
While the advances growth is likely to moderate from the current levels (52% CAGR over FY07-11), it would
substantially be higher than the industry’s, which would result in a strong growth in the earnings. We expect
Yes Bank’s advances to grow at a CAGR of 38% over FY11-13, leading to an approximately 28% growth in the
earnings. Currently, the stock is trading at 1.9x FY12 BV and 1.6x FY13 BV. We maintain Buy rating on the stock
with a price target of Rs415 (2.7x FY12 BV).
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