X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Yes Bank: No slowdown in growth - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

MidCapSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Yes Bank: No slowdown in growth
Jan 21, 2011

Yes Bank declared its 3QFY11 results. The bank has reported a 53% YoY and 52% YoY growth in net interest income and net profits respectively. Here is our analysis of the results.

Performance summary
  • Net interest income grows 65% YoY in 9mFY11 on the back of 66% YoY growth in advances.
  • Other income grows by a tepid 5% YoY in 9mFY11 due to lower treasury gains.
  • Net interest margin comes in marginally lower at 2.9% (3.0% in 9mFY10) due to pressure on interest costs.
  • Bottomline grows 55% YoY in 9mFY11 due to write back of provisioning and higher operating leverage.
  • Capital adequacy ratio (CAR) comfortable at 18%, gross NPA at 0.2% (specific NPA coverage 76%).

Rs (m) 3QFY10 3QFY11 Change 9mFY10 9mFY11 Change
Interest income †††† 6,264 ††† 11,262 79.8% †† 170,511 †† 281,913 65.3%
Interest expenses †††† 4,154 ††††† 8,030 93.3% †† 116,133 †† 192,071 65.4%
Net Interest Income †††† 2,110 ††††† 3,232 53.2% ††††† 54,378 ††††† 89,842 65.2%
Net interest margin       3.0% 2.9%  
Other Income †††† 1,278 ††††† 1,617 26.5% ††††† 41,539 ††††† 43,651 5.1%
Other Expense †††† 1,226 ††††† 1,736 41.6% ††††† 35,341 ††††† 49,332 39.6%
Provisions and contingencies †††††††† 254 †††††††† 250 -1.6% ††††††† 9,428 ††††††† 5,495 -41.7%
Profit before tax †††† 1,908 ††††† 2,863 50.1% ††††† 51,148 ††††† 78,666 53.8%
Tax †††††††† 648 †††††††† 952 46.9% ††††† 17,377 ††††† 26,291 51.3%
Profit after tax/ (loss) †††† 1,260 ††††† 1,911 51.7% ††††† 33,771 ††††† 52,375 55.1%
Net profit margin (%) 20.1% 17.0%   19.8% 18.6%  
No. of shares (m)         ††††††† 346.8  
Book value per share (Rs)*         ††††††† 106.5  
P/BV (x)         3.3  
* Book value as on 31st December 2010

What has driven performance in 9mFY11?
  • Yes Bank managed to sustain a high growth rate in 9mFY11 partially on the back of bulk disbursements to the telecom sector during the first six months of FY11. At the same time bulk deposits too comprised more than two thirds of the bankís overall deposit book. So the bankís growth so far this fiscal has at best been lumpy. Also in the results conference call the management cited that while it will continue to grow above sector average the current rate of growth may not be sustainable. However since most of its loan book can be re-priced in 12-months time, the bank does see rising interest rates hurting its margins. In fact Yes Bank sees NIMs sustaining at around 3% for the fiscal.

    CASA (current and savings accounts) as a proportion of total deposits remained stable at 10.2% at the end of December 2010. The bank has set a target of achieving 25% CASA by FY12 and 40% by FY15. The same may however be impacted by competition from the PSU and private sector players. As this proportion goes on increasing for the bank, the relative ease of low cost funding will help it shield its net interest margins (NIM) against cost pressures. The NIM for 9mFY11 at 2.9% is well within our estimates.

    Retail led growth on full steam...
    (Rs m) 9mFY10 % of total 9mFY11 % of total Change
    Advances 187,104   311,122   66.3%
    C&IB 119,747 64.0% 210,318 67.6% 75.6%
    Business Banking ††51,454 27.5% ††69,380 22.3% 34.8%
    Retail ††15,904 8.5% ††31,423 10.1% 97.6%
    Deposits 220,386   394,528   79.0%
    CASA ††22,291 10.1% ††40,369 10.2% 81.1%
    Term deposits 198,095 89.9% 354,159 89.8% 78.8%
    Credit deposit ratio 84.9%   78.9%    

  • The proportion of Yes Bankís non-funded income to total income dropped to 33% in 9mFY11 from 43% in 9mFY10. The drop can be largely attributed to lower treasury gains. Notwithstanding the fact that the bank has set a target of maintaining its non-interest income at 40% of total income until FY13, we have estimated the same to come down to remain below 35% in the next 3 years.

  • Despite an addition to franchise as well as employee base, Yes Bank has managed to sustain its cost to income ratio at 37% in 9mFY11 as in 9mFY10 because of improved productivity and operating leverage. The bank hired 969 employees in the first 9 months of FY11 bringing the total headcount to 3,785.

  • Yes Bankís CAR stood comfortable at 18.2% (as per Basel II) at the end of 9mFY11. The higher capital base also capacitates the bank to capitalise on growth opportunities being available in the sector going forward.

  • The bank had negligible net NPA while the gross NPA stood at 0.1% of advances at the end of 9mFY11. Yes Bank had total loan-loss coverage ratio of 283%, well above the RBIís mandate of 70%.

What to expect?
At the current price of Rs 271, the stock is trading at 1.7 times our estimated FY13 adjusted book value. Research Pro subscribers can view the latest updates here. Yes Bank has managed to outperform our broader growth estimates for FY11. Further, we are enthused by the bankís conservative provisioning policy. Having said that, the current rate of growth as well as margins may be sustainable. The current valuations of the bank offer reasonable upsides in the long term. We reiterate our positive view on the stock.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

YES BANK SHARE PRICE


Sep 21, 2018 (Close)

TRACK YES BANK

  • Track your investment in YES BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

YES BANK - DEUTSCHE BANK COMPARISON

COMPARE YES BANK WITH

MARKET STATS