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Yes Bank's 2QFY12 net profit of Rs2.4bn was ahead of our and Street estimates, with qoq NIM
improvement and stable credit quality trends. Higher-than-expected branch add was a positive
surprise in the quarter, even as costs remained under control. We maintain Buy
NIM surprises as yields reprice upwards and costs moderate
YES Bank's 2QFY12 net profit of Rs2,350m was 11% ahead of our estimates. NII grew 23% yoy
(9% qoq). Loans grew 12.7% yoy (3.3% qoq). However, if we include Rs66bn of outstanding
investments in corporate bonds, nonconvertible debentures, etc (ie, credit substitutes), growth
was 27.4% yoy (4.8% qoq). The bank retained its FY12 loan growth guidance of 25% yoy. NIMs
at 2.9% were up 10bp qoq (down 10bp yoy) mainly due to stable cost of funds (8.6% in 2Q, up
10bp qoq) and improved yields (at 12.2%, up 60bp qoq). Based on our analysis, Yes’s cost of
term deposits and borrowings fell by 10bp qoq to 8.9%. On a blended basis, the cost of interestbearing
liabilities fell 10bp qoq to 8.1% in 2QFY12 (see Table 2). The bank indicated that it had
raised foreign currency borrowings of US$250m in 2Q. Core fee income (ex income from
Financial Markets) grew 48.0% yoy (29.5% qoq) led by Financial Advisory (53.5% yoy) and
Transaction Banking (59.0% yoy). Gross NPAs were Rs688m (0.20% of loans), with a provision
cover of 80.2%. 2Q delinquencies at Rs150m were 5bp of loans (on a one-year lag basis) and
20bp on annualised basis.
Branch add continues at a fast pace
The bank added 50 branches in the quarter, a quicker run-rate than seen in earlier quarters.
Yes’s branch network as of September 2011 had risen to 305, with 91 branches having been
added in 1HFY12 alone. Current and savings deposits were 11.0% (of deposits), having grown
19% yoy and 2% qoq. Over a longer period, we expect the stock’s re-rating to be driven by its
success in retail banking. We hence view positively the faster-than-expected branch add in 2Q.
We note that Yes had also received 56 urban and metro area branch licenses from the Reserve
Bank of India (RBI) in 2Q.
Attractive valuations and strong margin recovery; we maintain Buy
We view positively the bank’s ability to improve its NIMs in 2Q in spite of a tough funding
environment. Yes Bank trades at 2.2x FY12F adjusted BV and 10.9x FY12F earnings, a 24%
discount to close peer IndusInd Bank (Hold) on one-year-forward BV and a 37% discount on
FY12F earnings. Our EVA™-based target price of YES is Rs405. We maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank's 2QFY12 net profit of Rs2.4bn was ahead of our and Street estimates, with qoq NIM
improvement and stable credit quality trends. Higher-than-expected branch add was a positive
surprise in the quarter, even as costs remained under control. We maintain Buy
NIM surprises as yields reprice upwards and costs moderate
YES Bank's 2QFY12 net profit of Rs2,350m was 11% ahead of our estimates. NII grew 23% yoy
(9% qoq). Loans grew 12.7% yoy (3.3% qoq). However, if we include Rs66bn of outstanding
investments in corporate bonds, nonconvertible debentures, etc (ie, credit substitutes), growth
was 27.4% yoy (4.8% qoq). The bank retained its FY12 loan growth guidance of 25% yoy. NIMs
at 2.9% were up 10bp qoq (down 10bp yoy) mainly due to stable cost of funds (8.6% in 2Q, up
10bp qoq) and improved yields (at 12.2%, up 60bp qoq). Based on our analysis, Yes’s cost of
term deposits and borrowings fell by 10bp qoq to 8.9%. On a blended basis, the cost of interestbearing
liabilities fell 10bp qoq to 8.1% in 2QFY12 (see Table 2). The bank indicated that it had
raised foreign currency borrowings of US$250m in 2Q. Core fee income (ex income from
Financial Markets) grew 48.0% yoy (29.5% qoq) led by Financial Advisory (53.5% yoy) and
Transaction Banking (59.0% yoy). Gross NPAs were Rs688m (0.20% of loans), with a provision
cover of 80.2%. 2Q delinquencies at Rs150m were 5bp of loans (on a one-year lag basis) and
20bp on annualised basis.
Branch add continues at a fast pace
The bank added 50 branches in the quarter, a quicker run-rate than seen in earlier quarters.
Yes’s branch network as of September 2011 had risen to 305, with 91 branches having been
added in 1HFY12 alone. Current and savings deposits were 11.0% (of deposits), having grown
19% yoy and 2% qoq. Over a longer period, we expect the stock’s re-rating to be driven by its
success in retail banking. We hence view positively the faster-than-expected branch add in 2Q.
We note that Yes had also received 56 urban and metro area branch licenses from the Reserve
Bank of India (RBI) in 2Q.
Attractive valuations and strong margin recovery; we maintain Buy
We view positively the bank’s ability to improve its NIMs in 2Q in spite of a tough funding
environment. Yes Bank trades at 2.2x FY12F adjusted BV and 10.9x FY12F earnings, a 24%
discount to close peer IndusInd Bank (Hold) on one-year-forward BV and a 37% discount on
FY12F earnings. Our EVA™-based target price of YES is Rs405. We maintain Buy.
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