Yes Bank - Q3FY14 Results - Indsec Securities and Finance Ltd

Top line growth has been disappointing: Yes Bank's Performance has been below expectation with total Income for the quarter growing by 17% Y/Y (-6% Q/Q) to Rs.10.53bn. Despite a 15% Y/Y (+5% Q/Q) growth in loan book to Rs.503bn, NII growth was lower at 14% Y/Y (-1% Q/Q), mainly due to 10 bps Y/Y contraction in NIM( 2.9%). To add: Non Interest Income was down 13% sequentially to Rs 3.88bn because the bank witnessed a 61% sequential drop in treasury gain (Rs 709 mn).

Operating Profit was under pressure : Cost-Income ratio of the bank has gone up by 440 bps Y/Y (+540 bps Q/Q) to 41.6% due to fall in Non Interest income by 13% sequentially. Further, one-off charge in the form of fee for its USD 150mn loan from IFC has also contributed 100-150bps to cost-income ratio. Due to high cost-income ratio, operating profit for the quarter was down 14% q/q (+9% Y/Y) to Rs 6.15 bn.

Provision reversal came to the rescue for PAT : The quarter saw bank making a total provision of Rs.652.9mn towards loan losses and write back of MTM provision of Rs.520mn on Bond portfolio; effectively making net provision of Rs.132.9mn as compared to Rs.1790mn provision in Q2FY14. Thus Provision reversal came to the rescue of the bank and PAT for the quarter went up 12% Q/Q (+21% Y/Y) to Rs 4.15bn. Adjusting for MTM, Total provision during Q3FY14 came at Rs 652.9mn Vs Q2 FY14 provision of Rs 680mn which is still low compared to growth in NPA.

Valuation and view: At the CMP of Rs 354, the stock is trading at 1.77 x FY14 consensus BV and 1.46x FY15 BV. Current price is attractive when seen from return-ratio perspective, however it is factoring in lower growth expectation. We do not see any immediate trigger for stock price to go up . However stock can be accumulated purely from valuation perspective.

Source : Equity Bulls

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