Yes Bank - Retail Journey on Track; Result Update Q3FY15 :: Edelweiss report

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Yes Bank posted yet another strong performance for Q3FY15 - PAT grew 30% YoY deriving strength form healthy revenue traction (on sustained loan growth, stable NIMs and improving fee income) and benign asset quality. Key highlights were: 1) GNPLs inched up marginally by 6bps QoQ to 42bps, despite lower slippages (0.4% versus 0.7% in Q2FY15) on lower write-offs; 2) fee income remained on track (up 38% YoY) with retail banking making progress; we expect this to continue given bank’s focus on building quality retail franchise (refer our note “Retail franchise: Building foundation mantra to scalability”); 3) credible efforts to build retail architecture will strengthen liability franchise (CASA + retail TD) and aims to take it to 60% in  next 3 years from current 42%. Adequate capital to fuel growth and strengthen its business model will reduce perceived volatility and aid further re-rating of the stock.

Core operating performance remains impressive

NII growth came in healthy (up 37% YoY) on higher loan growth and stable NIMs. After the opportunistic shift towards corporate book in Q2FY15, tilt shifted back to branch banking which bears testimony to the bank’s focus on building granularity. Further, given bank’s diligent efforts, branch banking origination will start forming a meaningful slice of overall asset pie - expects branch banking to contribute 30% to overall book over next 3 years.

Strengthened business model: Structural levers to curtail volatility

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LINK
https://www.edelweiss.in/research/Yes-Bank--Retail-Journey-on-Track;-Result-Update-Q3FY15/28024.html