Visit http://indiaer.blogspot.com/ for complete details Scorching pace of growth: Maintain Buy
Yes Bank results were in line with expectations at Rs 176
cr growing 57% y-o-y led by strong growth in advances at
86% y-o-y. Consequently, we increase our loan growth
targets, lower the spreads and hike FY11E/12E earnings
estimate by 7%/5%. We reiterate Buy with unchanged TP
of Rs 420 despite an earnings upgrade, due to dilution
risks and lower than expected CASA ratio.
Strong advances growth: Advances grew 57% y-o-y and
18% q-o-q. The management has indicated advances
would continue to grow at twice the pace of the industry,
translating into 55-60% growth in FY11E.
..But margins under pressure: The NIM for the quarter
declined to 3% from 3.1% in Q1FY11. Spreads have also
dropped with cost of funds going up by 40 basis points
from 6.3% to 6.7% with yield on advances remaining
constant at 9.6% due to the time lag in passing on impact
of higher cost of funds.
CASA momentum strong but deposit growth catching
up: CASA momentum remained strong, growing by
118% y-o-y and 27% q-o-q. As a ratio, it was lower at
10.1% vis-à-vis 10.5% in Q1FY11 due to deposit growth of
107% on y-o-y and 30% on q-o-q basis.
Fee income profile improving: Other income remained
flat on a y-o-y basis as treasury profits de-grew. However,
the share of transaction banking and third party related
fee income increased to 41% from 31% in Q2FY11 adding
granularity to fee income.
Valuation: We increase our loan growth targets for the
year to 55% /40% for FY11E/12E, lower the spreads and
hike our FY11E/12E earnings estimate by 7%/ 5%. We
reiterate BUY on the stock with a target price of Rs 420.
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