Yes Bank:: Top line and operating profit along expected lines. · ::CSEC Research

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Highlights:

·         Top line and operating profit along expected lines.

·         PAT up 32.9% YoY at Rs 2.54bn

·         Credit growth at 15.3%YoY and deposit growth of 19%YoY

·         Loans and credit substitutes up 28.1%YoY

·         CASA deposits up 46.9%YoY

·         Balance sheet up 36.1%YoY

·         Asset quality healthy, net NPLs at 0.04%

·         Margins stable at 2.8%

·         Traction in operating profits, up 28.1%YoY

Net interest income leads growth

Yes Bank's revenues and operating profit were along expected lines. PAT was up 32.9%YoY at Rs 2.54bn, 8.1% QoQ. For the eleventh straight quarter the bank reported sequential earnings growth. Backed by balance sheet growth, net interest income continued to drive operating profits; non-interest income along with lower charges (provisioning) on assets contributed to strong earnings growth.

Valuation

Although valuation multiples are at a premium to banks of similar size, out-performance on key parameters such as business growth and profitability, provide cushion for valuations. At current levels the stock trades at 1.86X FY13E adjusted book value and 9.6X FY13E EPS. The bank plans to raise about Rs 22.5 billion through QIP, we have factored in an offer of 35 million shares at Rs 300 apiece. With valuations having run up we rate the stock a MARKETPERFORMER with a target price of Rs 365. Key risks include a slower than expected balance sheet growth and inability to pass on higher cost of funds.

  

Regards,

CSEC Research