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Yes Bank (YESB.BO; Rs300.55; 1M)
Takeaways from Mumbai - Yes Bank presented at our India Investor
Conference in Mumbai. Below are key takeaways.
Loan growth likely to moderate from current high levels - While loan growth
has been a key positive for the bank, the management said that signs of a loan
growth slowdown are now visible. While some of this is linked to a lower
underlying demand, the higher base should also soften headline growth.
However, growth should still track well ahead of the industry at 30-35%yoy over
the next few years. The focus would continue to be on the corporate segment
which currently forms around 65% of the loan book. However, the management
is also expanding into the retail segment, where it has tied up with housing
finance companies for mortgages, albeit we expect this shift would be more
gradual.
Margin outlook likely to remain firm - Management believes that there are
macro headwinds near term which would pressure margins over the next few
quarters. The cost of funds should climb, though with their pricing power, they are
confident of passing this hike on to the borrowers, keeping their margins
relatively stable. NIMs for the bank should stay close to 4QFY11 levels in
1HFY12, though there should be a pickup in the latter part of the year and overall
for FY12, margins are expected to remain stable near 290bps levels.
Strong asset quality - The management appeared confident of maintaining its
strong asset quality performance in the coming quarters. There could be some
pressures emanating from the Commercial Real estate book which currently
forms around 2-2.5% of the loan book, but given their strong risk management
and underwriting skills, they believe the risk can be well managed going ahead.
Capital raising - While the Tier I capital for the bank is comfortable at over 9%
levels, with the strong growth planned, management guided to a capital raising
cycle around the same time, next year. They are comfortable with a Tier I of 8.25-
8.50% and would look to raise capital and shore their Tier I capital adequacy to
above 12% post money.
Distribution rollout - Yes Bank's second phase of growth seems well on track,
with a continuous build-out of their branch network, which currently stands
around 250 branches. They plan to position their liability focused strategy on this
expansion over the next few years, as their branches break even and reach
critical mass.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank (YESB.BO; Rs300.55; 1M)
Takeaways from Mumbai - Yes Bank presented at our India Investor
Conference in Mumbai. Below are key takeaways.
Loan growth likely to moderate from current high levels - While loan growth
has been a key positive for the bank, the management said that signs of a loan
growth slowdown are now visible. While some of this is linked to a lower
underlying demand, the higher base should also soften headline growth.
However, growth should still track well ahead of the industry at 30-35%yoy over
the next few years. The focus would continue to be on the corporate segment
which currently forms around 65% of the loan book. However, the management
is also expanding into the retail segment, where it has tied up with housing
finance companies for mortgages, albeit we expect this shift would be more
gradual.
Margin outlook likely to remain firm - Management believes that there are
macro headwinds near term which would pressure margins over the next few
quarters. The cost of funds should climb, though with their pricing power, they are
confident of passing this hike on to the borrowers, keeping their margins
relatively stable. NIMs for the bank should stay close to 4QFY11 levels in
1HFY12, though there should be a pickup in the latter part of the year and overall
for FY12, margins are expected to remain stable near 290bps levels.
Strong asset quality - The management appeared confident of maintaining its
strong asset quality performance in the coming quarters. There could be some
pressures emanating from the Commercial Real estate book which currently
forms around 2-2.5% of the loan book, but given their strong risk management
and underwriting skills, they believe the risk can be well managed going ahead.
Capital raising - While the Tier I capital for the bank is comfortable at over 9%
levels, with the strong growth planned, management guided to a capital raising
cycle around the same time, next year. They are comfortable with a Tier I of 8.25-
8.50% and would look to raise capital and shore their Tier I capital adequacy to
above 12% post money.
Distribution rollout - Yes Bank's second phase of growth seems well on track,
with a continuous build-out of their branch network, which currently stands
around 250 branches. They plan to position their liability focused strategy on this
expansion over the next few years, as their branches break even and reach
critical mass.
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