Yes Bank - Good overall show; Management commentary encouraging - Nirmal Bang

Yes Bank reported good results yet again broadly in line with estimates. The bank reported PAT of Rs.362 cr in Q4FY13 resulting in a growth of 5.8% QoQ and 33.2% YoY. For FY13, PAT stood at Rs 1,301 cr up 33.1%.

Performance was driven by strong growth in net interest income, non interest income (primarily financial markets) and contained cost to income ratio. Asset quality continued to remain the best in industry with Gross NPA at 0.2% and net NPA at 0.01%. Restructured book witnessed decline YoY; Management has guided for slightly higher credit cost (50-60 bps) for FY14E which considering the current environment is within comfortable zone. Management commentary sounded encouraging with 25-30% growth in assets, improvement in margins (15-20 bps), sustainable fee income (at 35% of total income) and stable asset quality. Traction in CASA accounts is expected to continue going forward and higher non-interest income will aid in sustaining healthy return ratios. Driven by the strong performance, we expect the bank's profitability to grow at 26% CAGR over FY13-FY15E.

At CMP, the stock is trading at a PE of 11.77x and 9.42x of FY14E and FY15E EPS and at an adjusted P/BV of 2.1x and 1.77x FY14E and FY15E Adj BV. We arrive at a target price of Rs 576 (2.5x FY14E ABV) indicating potential upside of 19.1% from current levels. We recommend investors to continue to HOLD the stock at current levels and further accumulate on any decline from here on.

- Yes Bank's loan book continued to show growth momentum as advances increased 23.7% YoY and 7.2% on a QoQ basis in Q4FY13

- Total Customer Assets (Loans + Credit Substitutes) grew by 30.9% to Rs 60,360 cr as on March 31, 2013.

- CASA deposits increased by 71.6% YoY and 22.7% QoQ (albeit on a lower base) to Rs 12,687.5 cr taking the CASA ratio to 18.9% in Q4FY13.

- Net Interest Margin (NIM) remained stable and stood at 3.0% for the quarter. For FY13 NIMs stood at 2.9%.

- Despite an increase in total operating expenses cost to income ratio stood at 37.7% in Q4FY13 and 38.4% in FY13.

- Gross NPA increased 23.7% QoQ to Rs.94.32 Cr in Q4FY13. Gross NPAs and Net NPAs stood at 0.20% & 0.01%, respectively as on March 31, 2013.

- Slippages for the quarter stood at Rs 35 cr while for FY13 stood at Rs 243 cr The bank has managed to bring down its restructured portfolio from Rs 190 cr (0.53% of advances) to Rs 144 cr (0.31% of advances) which is commendable given the current challenging environment.

- Management has guided for credit cost of 50-60 bps for FY14E.

- Provision coverage ratio of the bank (including technical write off) stood at 92.6% in Q4FY13.

- CAR stood at 18.3% with Tier I ratio of 9.5%.

- The branch network stood at 430 and ATM network stood at 951 as on 31st March 2013.

Source : Equity Bulls

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