Yes Bank - Strong all round performance - Sunidhi

Yes Bank reported a healthy PAT growth of 30% yoy to Rs.3.1 bn in Q2FY13. NIM improved by 10 bps qoq to 2.9% on the back of sequential CASA improvement, higher retail deposit and better CD ratio. Strong traction seen in SA deposits growing 351.3% yoy which resulted in CASA ratio improving to 17.3%. Asset quality improved with GNPAs coming off sequentially and no incremental restructuring.

NIM improves sequentially

Net interest income came in at Rs.5.24 bn expanding by 36% yoy and 11% qoq owing to sequential improvement in NIM by 10 bps to 2.9%. NIM improved on the back of a 20 bps sequential decline in cost of funds, CASA improvement, higher retail deposit and better CD ratio.

Loan book growth led by corporate segment

Advances grew by a strong 23% yoy and 9% qoq exceeding deposit growth leading to a 360 bps sequential increase in the CD ratio to 80%. Loan book growth was led by the corporate and institutional segment. Meanwhile commercial banking came off sequentially. Advances including credit substitutes grew by 33%.

CASA improves sequentially

The bank reported a deposit growth of 19% yoy and 4% qoq. Strong traction was seen in SA deposit post RBI deregulation and tax benefit in budget reporting a growth of 351.3% yoy which resulted in CASA ratio improving to 17.3% from 11% in Q2FY12 (98 bps improvement sequentially). This was further supported by traction in branch network adding granularity in liabilities and assets which resulted in core deposit (CASA + Term deposit) improving to 36.6% of liabilities vs. 28.6% yoy.

Strong non-interest income growth led by retail fees

Non-interest income grew by a strong 29.3% yoy, led by a 113% increase in retail fees. However on a sequential basis other income came off by 4% qoq due to a 50% qoq decline in financial markets income. Going ahead, the bank targets to improve its retail based fee income of the total fee income.

Asset quality improves sequentially

Asset quality improved sequentially with GNPAs coming off by 6% qoq and NNPAs by 15% qoq. %GNPAs and %NNPAs too saw an improvement of 4 bps and 1 bps qoq respectively. The PCR improved by 209 bps qoq to 80.4%. The bank did not restructure any new accounts during the quarter and the outstanding restructured book stood at Rs.1.9 bn or 0.5% of gross advances. Out of the total exposure of stressed media account, about Rs. 0.6bn hss already been recovered and Rs. 0.5bn has already been provided for whereas the remainder is adequately collateralized.

Tier 1 CAR at 9.5%

The bank has raised Rs.6bn of lower Tier II bonds and Rs.2 bn of upper Tier II bonds during the quarter. The CAR stands at 17.5% as at the end of Q2FY13 and the tier 1 capital at 9.5%.

Revise rating from Accumulate to Hold with a target price of Rs.440

We have revised our estimates to factor in the banks H1FY13 performance. At the CMP of Rs.400 the bank trades at 2.5x its FY13E ABV and 2.0x its FY14E ABV. Due to the recent run up in the bank's stock price we revise our rating on the stock from Accumulate to Hold with a revised price target of Rs.440 (2.2x its FY14E ABV) from Rs.397 earlier.

Source : Equity Bulls

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