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Yes Bank reported strong headline numbers, the Rs 2.35bn PAT (up
33%y/y) driven mainly by fees. Credit growth remains muted, and CASA
momentum slowed given the weak environment. However ROAs and
ROEs continue to be robust and we maintain OW.
CASA momentum slowing. The CASA ratio remained flat despite
negligible balance sheet growth. This is a tough environment for CASA
balances (other banks have shown stress too), but Yes’ low base does
highlight the issue a little more. The coming quarters will test Yes’
CASA franchise.
Strong fee performance. Fee growth at 75% y/y was the key positive
surprise. The key drivers were currency volatility and heavy (debt) IB
deal flow, partly driving a spurt in the corporate investment book. We do
not see fee growth sustaining at these elevated levels, but expect it will
continue to be a key franchise for Yes while they consolidate the loan
book.
Credit growth slowing. Customer assets grew 27% y/y, led largely by
credit substitutes. We think there will be a period of 4-6 quarters when
Yes grows at ~25% y/y, which is a positive given the slowing economy.
Our reading of the sharp growth in credit substitutes is that it was
tactical given the stage of the cycle, and the focus on fees.
Maintain Overweight. We cut estimates by 4-6% on lower b/s growth
and revise down our Mar-12 PT to Rs355/share from Rs380/share
earlier. Yes is going through a bit of flux as it consolidates its balance
sheet and tries to kickstart its retail liabilities franchise. The strong fee
franchise is a great buffer in these circumstances as it is driving ROE
improvements. We maintain OW.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank reported strong headline numbers, the Rs 2.35bn PAT (up
33%y/y) driven mainly by fees. Credit growth remains muted, and CASA
momentum slowed given the weak environment. However ROAs and
ROEs continue to be robust and we maintain OW.
CASA momentum slowing. The CASA ratio remained flat despite
negligible balance sheet growth. This is a tough environment for CASA
balances (other banks have shown stress too), but Yes’ low base does
highlight the issue a little more. The coming quarters will test Yes’
CASA franchise.
Strong fee performance. Fee growth at 75% y/y was the key positive
surprise. The key drivers were currency volatility and heavy (debt) IB
deal flow, partly driving a spurt in the corporate investment book. We do
not see fee growth sustaining at these elevated levels, but expect it will
continue to be a key franchise for Yes while they consolidate the loan
book.
Credit growth slowing. Customer assets grew 27% y/y, led largely by
credit substitutes. We think there will be a period of 4-6 quarters when
Yes grows at ~25% y/y, which is a positive given the slowing economy.
Our reading of the sharp growth in credit substitutes is that it was
tactical given the stage of the cycle, and the focus on fees.
Maintain Overweight. We cut estimates by 4-6% on lower b/s growth
and revise down our Mar-12 PT to Rs355/share from Rs380/share
earlier. Yes is going through a bit of flux as it consolidates its balance
sheet and tries to kickstart its retail liabilities franchise. The strong fee
franchise is a great buffer in these circumstances as it is driving ROE
improvements. We maintain OW.
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