Yes Bank - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Yes Bank reported a strong performance on the earnings as well as the asset quality front. On the operating front, while higher-than-anticipated growth in other income (42.4% yoy) aided pre-provisioning profit to grow by 47.3% yoy, slightly above estimates, the bank used the opportunity to make higher provisions (PCR up by 13 percentage points), which resulted in earnings growth of 33.2% yoy, in-line with our estimates.

Business growth robust, NIMs stable qoq: During 4QFY2013, the bank registered a healthy growth in its business, as advances and deposits grew by 23.7% and 36.2% yoy, respectively. CASA deposits grew by 71.6% yoy, thereby taking its CASA ratio to 18.9% from 15.0% as of 4QFY2012. Savings deposits rose by 22.8% qoq to Rs. 6,023cr. NIMs for the bank remained stable sequentially at 3.0%. The bank's non-interest income grew strongly by 42.4% yoy to Rs. 379cr, largely on account of substantial growth witnessed in the financial advisory and retail fee income streams. On the asset quality front, the bank witnessed an increase in the Gross NPA levels (higher by 23.7% sequentially, on an absolute basis). However, the bank stepped up its PCR from 79.6% to 92.6%, resulting in a 3bp sequential decline in the Net NPA ratio to 0.01%.

Outlook and valuation: Yes Bank's growth as well as its Management's track record has been impeccable so far. The bank has taken the challenge of building a retail deposit franchise head-on and has doubled its branch network over the past two years to 430 branches now. We expect the bank to continue registering robust growth on the retail deposit franchise front, however, with the likely entry of new strong players in the sector, the opportunity for market shares gains could get reduced from the levels envisaged earlier.

On the asset quality front, the bank has performed well so far, with credit costs contained at ~35bps for FY2013. However going ahead, the Management has guided credit costs for FY2014E, to be in the range of 50-60bps and has indicated 'adversely labeled assets' to the tune of 1-2% of loan book, which is likely to reflect in significant increase in provisioning costs for the bank from the current levels. As a result, even with 25% balance sheet growth, earnings may be at lower levels of 15%. At CMP, post the recent rise, the stock trades at a valuation of 2.4x FY2014E ABV and 2.0x FY2015E ABV, which in our view, factors in most of the positives for the bank and offers limited scope for upside from the current levels. Hence, we recommend a Neutral rating on the stock.

Shares of Yes Bank last traded in BSE at Rs.491.05, up by Rs.11.55 or 2.41%. The stock hit an intraday high of Rs.493 and low of Rs.475.

The total traded quantity was 4.45 lakhs compared to 2 week average of 3.38 lakhs.

Source : Equity Bulls

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