Beneficiary of a moderating rate cycle: Yes Bank is a wholesale fund bank
and margins have been under pressure due to high rates. With RBI
delivering a surprise ~50bps cut and wholesale rates cooling off, we
believe margins will inch up for Yes in FY13.
Asset quality continues to remain robust: Delinquency and credit costs
continue to remain low and Yes bank’s involvement in CDR cases seem
very low and hence, asset quality will continue to surprise positively. We,
thus, believe market expectations of 60-70bps credit costs in FY13 may not
materialize leading to positive earnings surprise.
SA momentum strong: Liability franchise has been a weak point for Yes
but the SA de-regulation was a shot in the arm. Liability franchise build-up
on expected lines with Rs5bn SA accretion QoQ in Q1FY13.
Valuations and stock view: Robust asset quality and improving liability
franchise will lead to further re-rating. We build in just 2% accretion to
CASA every year and ~60‐70bps of credit costs over FY13/14 which leaves
scope for further earnings surprise. The stock is trading at 2.1x FY13 book,
we believe valuations are very reasonable. We expect a PT of Rs450/share
over next 6-12mnts.
No comments:
Post a Comment