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Key Takeaways
Management's cautious approach to moderate loan growth
Yes Bank's change in strategy of being cautiously optimistic instead of aggressively
growth-centric in an uncertain environment augurs well for the bank.
The management expects loan growth to be 1.5x of the industry average in the
current fiscal, but its medium-term target of 30-35% YoY growth remains unchanged.
In the near term the key focus area is likely to be corporate and institutional banking
(C&IB, for clients with a turnover >INR20b) and commercial banking (for clients
with turnover of INRs2b-20b) to grow its loan book.
The expanding branch network will help to grow its high yielding branch banking
loans. The bank expects to increase the share of SME and retail loans to 30% by
FY15 from 12% currently.
Improving liability franchise a key focus area
YES is predominantly wholesale funded bank and is focusing on improving its retail
liabilities by branch expansion, new customer acquisition and superior technology.
The bank increased its branch network to 255 from 155 a year earlier. The
management believes that reaching a branch network of 300-400 branches would
be an inflexion point for the strong retail liabilities growth ahead and has guided for
CASA and retail deposits as a percentage of total deposits to increase to 60% from
27% currently. It plans to add 35-40 branches every quarter.
To achieve its objectives YES Bank has hired top three leaders from Axis Bank who
were instrumental in driving their liability strategy, particularly CASA strategy.
Buffer to margins in place, to be 2.8-3% in the near term
YES has no major exposure to consumer lending (carrying a fixed rate of interest)
and ~95% of the loan book is either floating or of short tenor.
As loans are largely on a floating-rate basis, the management is confident of passing
bulk deposit costs to borrowers and maintaining margins of 2.8-3%.
Asset quality robust
Yes Bank's asset quality is robust with GNPA of 0.2% and NNPA at near zero. The
bank has started de-bulking its balance sheet to diversify its risk profile.
With low restructured loans and strong credit appraisal asset quality is expected to
be healthy.
Valuation and view
Key positives for YES are: (1) strong growth, (2) proven execution capabilities, (3)
diversified fee income and (4) superior return ratios. We expect RoA of 1.3-1.4%
and RoE of 22%+. Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Management's cautious approach to moderate loan growth
Yes Bank's change in strategy of being cautiously optimistic instead of aggressively
growth-centric in an uncertain environment augurs well for the bank.
The management expects loan growth to be 1.5x of the industry average in the
current fiscal, but its medium-term target of 30-35% YoY growth remains unchanged.
In the near term the key focus area is likely to be corporate and institutional banking
(C&IB, for clients with a turnover >INR20b) and commercial banking (for clients
with turnover of INRs2b-20b) to grow its loan book.
The expanding branch network will help to grow its high yielding branch banking
loans. The bank expects to increase the share of SME and retail loans to 30% by
FY15 from 12% currently.
Improving liability franchise a key focus area
YES is predominantly wholesale funded bank and is focusing on improving its retail
liabilities by branch expansion, new customer acquisition and superior technology.
The bank increased its branch network to 255 from 155 a year earlier. The
management believes that reaching a branch network of 300-400 branches would
be an inflexion point for the strong retail liabilities growth ahead and has guided for
CASA and retail deposits as a percentage of total deposits to increase to 60% from
27% currently. It plans to add 35-40 branches every quarter.
To achieve its objectives YES Bank has hired top three leaders from Axis Bank who
were instrumental in driving their liability strategy, particularly CASA strategy.
Buffer to margins in place, to be 2.8-3% in the near term
YES has no major exposure to consumer lending (carrying a fixed rate of interest)
and ~95% of the loan book is either floating or of short tenor.
As loans are largely on a floating-rate basis, the management is confident of passing
bulk deposit costs to borrowers and maintaining margins of 2.8-3%.
Asset quality robust
Yes Bank's asset quality is robust with GNPA of 0.2% and NNPA at near zero. The
bank has started de-bulking its balance sheet to diversify its risk profile.
With low restructured loans and strong credit appraisal asset quality is expected to
be healthy.
Valuation and view
Key positives for YES are: (1) strong growth, (2) proven execution capabilities, (3)
diversified fee income and (4) superior return ratios. We expect RoA of 1.3-1.4%
and RoE of 22%+. Maintain Buy.
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