Yes Bank analyst meet take away

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Yes Bank analyst meet take away:
1. The vulnerable pool of Rs100bn against which contingent provision made, comprises of ~6 a/c across infra, entertainment and real estate.

2. Bank's is comfortable with the LGD in these accounts. The recognition pertains to cash flow mismatch and hence likely slippage.

3. Will continue to grow loan book at 20-22%. Reduce focus on infra, real estate lending. Incremental corporate loan to better rated entity.

4. Intent to grow retail and SME book to 50% and corporate to 50% in next 5years.

5. Bank to be selective in structured loan business however focus more on transactional banking.

6. The minimum threshold CET1 to be 9.5%.

7. Credit cost in FY19 at 205bps, FY20e 125bps and than will return to normal level in FY21.

8. RoA to reach 1% in three years and than to 1.5% in 5years. 

Result in brief: NII Rs25.6bn (+16.3% yoy) vs our exp of RS 27bn. Operating profit Rs13bn (-33%). Provision of Rs37bn (+816% YoY). PAT - Rs15bn. GNPA/NNPA 3.22%/1.86% (+1.12/+68bps) qoq.

Our take: The credit readjustment process for Yes bank is similar to what other Axis bank underwent 2 years back. Lack of capital and downward adjustment of RoA will take a dent on Yes bank's valuation. See sizable earnings downgrade post the result.