Buy Yes Bank ::Version 2.0: retail growth phase… 􀂃 ICICI Securities,

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Version 2.0: retail growth phase…
􀂃 Attaining scale with wholesale banking to venture into retail…
• Yes Bank is a new generation private sector bank with core
domain of wholesale banking, now foraying into retail banking
• The bank has undertaken aggressive business growth of 72%
CAGR over FY06-11 to scale up its business size to | 80302 crore
from | 1424 crore in FY05
• Profitability robust as NII grew 71% CAGR boosting PAT by 67%
CAGR during the past five years. Indeed the wholesale version
growth was healthy (negligible NNPA) and wealthy. The next
phase (retail focused growth) would lead to business mix grow by
2x current size by FY15E.
• Healthy NIM maintained in the range of 2.9-3.0% in FY08-11
despite a low CASA ratio of ~10% shows pricing power enjoyed
by the bank
• Higher contribution of non-interest income to total income (over
30%), as compared to other banks, cushions bottomline growth
and enables it to maintain higher RoA
• No asset quality concerns unlike its PSB peers implying lower
credit costs
• The bank has consistently been recognised as the fastest growing
mid-sized bank along with CMD Rana Kapoor who is considered
as Indian business leader by Businessworld magazine
􀂃 Going ahead: growth proposition
• Yes Bank aims to grow its business at 36% CAGR over FY10-15E
while increasing its retail presence (retail book aimed at 40% of
total loan mix). This looks achievable with the bank planning to
grow its branch network from current 214 to 750. This will enable
it to strengthen its liability franchise (CASA), thus boosting
margins
• With the bank gaining on scale we expect the business to grow at
(1.5-2x industry growth rate from current 3x). This will support
40% NII and 40-45%PAT CAGR in the coming period.
Valuation
Yes Bank has consistently delivered superior return ratios with RoA above
1.5% and RoE above 20% for the past three years despite incurring equity
dilution every year. We expect robust business growth and healthy
margins to continue, leading to return ratios being maintained with RoA
above 1.3% and RoE over 20% going ahead.