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Yes Bank -------------------------------------------------------------------- Maintain UNDERPERFORM
Pulling back on growth as funding cost pressure is felt
● Yes Bank’s 1Q profit (Rs2.1 bn; +38% YoY) was in line as the
bank offset pressure from a sharp rise in funding cost (+70 bp
QoQ after a 70 bp rise in 4Q11) by contracting loan book (-4%
QoQ, 26% YoY – its lowest ever) and charging nil credit cost.
● The bank has opened 70 branches in the past six months (41 this
quarter) despite which CASA deposits were flat QoQ and its share
in total deposits was little changed at 10.9%.
● With slowing growth, management stated that equity dilution might
be pushed to FY13; however, with Tier 1 remaining at 9.6%
(despite a QoQ decline in loans), we expect capital raising in 2H
FY12 (the bank has already taken board approval for raising
US$500 mn capital).
● Reported profitability of 1.5% ROA (22% ROE) was buttressed by
bank charging zero credit cost in 1Q12 and at normalised credit
cost (0.67% is the past three-year average), RoE would be 18%.
At 2.4x FY12E book value, it is now trading at premium to Axis,
ICICI that have a well developed deposit franchise. We maintain
our UNDERPERFORM rating.
Muted growth, stable margins and strong asset quality
Loans were down 4% QoQ and loan growth was moderated to 26%
YoY (all-time low for the bank). Management maintains its FY12 loan
growth guidance of 35% (our forecast FY12 credit growth is at 37%).
NIMs were in line with expectations at 2.8% – flat QoQ (down 30 bp
YoY) and LDRs were stable at 76%. Funding cost was up 70 bp QoQ
(7.8% in 1Q) and was matched by a 90 bp rise in loan yields (10.7% in
1Q). Share of CASA continued to be low at 10.9%. The bank has
added 41 branches during the quarter (currently at 255 branches) and
achieved its branch target of 250 by Jun-11. It is targeting to reach
350 by Mar-12. Asset quality continued to be healthy with gross NPLs
at 0.17%. NPL coverage further improved to 95% from 89% in 4Q11.
Credit cost during the quarter was at 0.0% which we believe is
unsustainable going forward
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Yes Bank -------------------------------------------------------------------- Maintain UNDERPERFORM
Pulling back on growth as funding cost pressure is felt
● Yes Bank’s 1Q profit (Rs2.1 bn; +38% YoY) was in line as the
bank offset pressure from a sharp rise in funding cost (+70 bp
QoQ after a 70 bp rise in 4Q11) by contracting loan book (-4%
QoQ, 26% YoY – its lowest ever) and charging nil credit cost.
● The bank has opened 70 branches in the past six months (41 this
quarter) despite which CASA deposits were flat QoQ and its share
in total deposits was little changed at 10.9%.
● With slowing growth, management stated that equity dilution might
be pushed to FY13; however, with Tier 1 remaining at 9.6%
(despite a QoQ decline in loans), we expect capital raising in 2H
FY12 (the bank has already taken board approval for raising
US$500 mn capital).
● Reported profitability of 1.5% ROA (22% ROE) was buttressed by
bank charging zero credit cost in 1Q12 and at normalised credit
cost (0.67% is the past three-year average), RoE would be 18%.
At 2.4x FY12E book value, it is now trading at premium to Axis,
ICICI that have a well developed deposit franchise. We maintain
our UNDERPERFORM rating.
Muted growth, stable margins and strong asset quality
Loans were down 4% QoQ and loan growth was moderated to 26%
YoY (all-time low for the bank). Management maintains its FY12 loan
growth guidance of 35% (our forecast FY12 credit growth is at 37%).
NIMs were in line with expectations at 2.8% – flat QoQ (down 30 bp
YoY) and LDRs were stable at 76%. Funding cost was up 70 bp QoQ
(7.8% in 1Q) and was matched by a 90 bp rise in loan yields (10.7% in
1Q). Share of CASA continued to be low at 10.9%. The bank has
added 41 branches during the quarter (currently at 255 branches) and
achieved its branch target of 250 by Jun-11. It is targeting to reach
350 by Mar-12. Asset quality continued to be healthy with gross NPLs
at 0.17%. NPL coverage further improved to 95% from 89% in 4Q11.
Credit cost during the quarter was at 0.0% which we believe is
unsustainable going forward
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