Strong performance; likely to continue… • Yes Bank:: ICICI Securities PDF link

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Strong performance; likely to continue…
• Yes Bank’s earnings of | 483 crore (up 30% YoY) were above our &
Street estimates driven by higher-than-expected growth of 27.4%
YoY in NII to | 856 crore and 13% YoY in other income to | 505 crore
• NII traction was owing to strong margins of 3.2% (driven by capital
raising in Q1FY15) vs. expectation of 3.1% and due to strong credit
growth of 30% YoY (I-direct estimate: 23%) to | 62030 crore.
Deposits also grew at a healthy pace of 18.6% YoY to | 80131 crore
• Asset quality witnessed higher slippages of | 151 crore but owing to
healthy recoveries & upgradation of | 127 crore, the closing GNPA
increased by | 24 crore to | 222 crore (0.36% vs. 0.33% in Q1).
Restructured book was flat QoQ at | 116 crore (0.19% of advances)
Version 2.0 to fall short of target, credit to grow at healthy 19% CAGR
Version 2.0 aims to achieve 750 branches, 3000 ATMs, | 1.25 trillion
deposit, | 1 trillion credit, 30% retail/SME credit and 30% CASA ratio by
FY15E. Largely, it aims to strengthen the retail presence on both the
deposit (low cost CASA to reduce CoF) and credit (retail is high yielding)
front. The bank is likely to fall short of its target by 15-20% in majority of
the parameters. Historically, credit has grown at a brisk pace of 53.9%
CAGR in FY08-11 to | 34364 crore while over FY11-14 growth has been
modest at 16.8% CAGR to | 54755 crore. Credit is expected to grow at
22% CAGR to | 82876 crore to support 22% NII CAGR over FY14-16E.
Though wholesale funded business – NIM well managed at 2.8-3.0%
On the liability side of the balance sheet, around 58% (~| 44000 crore) of
Yes Bank’s deposits is wholesale funded that is highly sensitive to interest
rate unlike steady retail deposits. As per our rough calculations, a 1% rise
in cost of wholesale deposits adversely impacts NIM by ~30 bps, NII by
~| 300 crore and PAT by ~| 200 crore in a year. However, the bank has
consistently managed its NIM well so far. Going ahead, we expect the
bank to report NIM of 3.1% in FY15E and 3.2% in FY16E as the proportion
of low cost CASA and high yielding retail book increases.
Superior asset quality to be maintained
On the asset side, the bank has ~85% exposure towards corporates,
which poses concentration risk. Large corporate (sales above | 1000
crore) constitute 68.7%, mid-corporate – 14.5% and SME & retail– 16.8%.
Despite having major exposure to corporate, asset quality is stable with
GNPA of | 222 crore (0.36% of credit), NNPA of | 54 crore (0.09% of
credit) and restructured assets of mere | 116 crore (0.19% of credit). We
expect GNPA of | 335 crore and NNPA of | 69 crore by FY16E.
Profitability, return ratios to stay robust
The profit of Yes Bank has grown at a strong pace of 39.5% CAGR from
| 305.7 crore in FY09 to | 1617.8 crore in FY14. Going ahead, we expect
PAT to grow at 26% CAGR to | 2572 crore over FY14-16E on the back of i)
healthy credit growth (22% CAGR), ii) NIM improvement to 3.2% by
FY16E and iii) limited provisioning owing to stable asset quality. In the
past five years, the bank has consistently delivered 1.5%+ RoA and
20%+ RoE, which is estimated to be maintained during FY14-16E.
Continued performance may result in re-rating; maintain BUY & raise TP
Yes Bank has successfully managed to deliver a consistent performance
despite a volatile environment. We raise our PAT CAGR expectation over
FY14-16E from 21% to 26% as we increase our credit growth & margin
estimates. Maintaining the multiple of 2.2x FY16E ABV, we raise our
target price to | 750 from | 723 earlier. We maintain BUY rating.

LINK
http://content.icicidirect.com/mailimages/IDirect_YesBank_Q2FY15.pdf