Buy Yes Bank - Q4 FY 2011 Result Update - Motilal Oswal

Yes Bank (YES IN; Mkt Cap USD2.6b, CMP Rs331, Buy)

NIM remained stable at 2.8% QoQ, as increase in cost of funds (up 70bp) was compensated by equivalent increase in yield on loans.

Loans grew 55% YoY and 10% QoQ. Sequentially, the share of branch banking has increased from 10% to 12% while the share of C&IB has declined to 66%.

Deposits grew 71% YoY and 16% QoQ. CASA deposits grew 69% YoY and 18% QoQ and CASA ratio improved marginally QoQ from 10.2% to 10.3%.

Non-interest income grew 16.7% YoY and 15.5% QoQ, led by healthy growth in fee income streams except financial markets.

The bank added 29 branches (64 branches in past year), taking the branch network to 214. Management targets to expand its branch network to 325 by FY12.

Despite tight liquidity conditions and sharp increase in bulk deposit rates, Yes Bank has been able to maintain margins at ~3% in FY11. We are impressed by this performance and believe that this demonstrates the soundness of its asset liability management. Incremental trend in core fee income is also encouraging. The stock trades at 12x FY12E EPS and 10x FY13E EPS, and at 2.5x FY12E BV and 2.1x FY13E BV. We maintain Buy, with a target price of Rs405 (2.5x FY13E BV).

Source : Equity Bulls

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