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Yes Bank Q3FY13 results update

Contributed by Nirmal Bang

Yes Bank reported strong results above expectations on all fronts of net interest income, non interest income, asset quality and overall profitability. The bank reported PAT of Rs.342.3 cr in Q3FY13 resulting in a growth of 34.7% on a YoY basis and 11.8% on QoQ basis. Going forward, we expect Yes Bank to continue to report strong growth in advances and overall profitability. Traction in CASA accounts will continue to drive margin performance. The bank has been able to have a strong foothold on the non interest income front which enables the bank to generate higher return ratios (RoA of 1.5%+ and RoE of 24%+). Driven by the strong performance, we expect the bank’s profitability to grow at 30.7% CAGR over FY12-FY14E.

At CMP, the stock is trading at a PE of 14.45x and 12.28x of FY13E and FY14E EPS and at an adjusted P/BV of 3.23x and 2.27x FY13E and FY14E Adj BV. We arrive at a target price of Rs 578 (2.5x FY14E ABV) indicating potential upside of 10.3% from current levels. We continue to maintain our HOLD rating on the stock.

Total Customer Assets (Loans + Credit Substitutes) grew by 27.4% to Rs 55,750 cr in Q3FY13 from Rs 43,750 cr in Q3FY12.

- CASA deposits increased by 74.9% YoY and 14.5% QoQ to Rs 10,341 cr taking the CASA ratio to 18.3% in Q3FY13. Net Interest Income increased by 36.7% YoY to Rs 524 cr in Q3FY13.

- NIM stood at 3% in Q3FY13; an improvement of 20 bps on YoY basis and 10 bps on QoQ basis. The primary reason for improvement in NIMs was reduction of cost of funds by 20 bps on QoQ basis.

- The growth in total income outpaced the growth in total expenses leading to an improvement in cost to income ratio (37.2%) on both QoQ and YoY basis.

- Gross NPA declined 25.9% QoQ to Rs.76.2 Cr in Q3FY13. Gross NPAs and Net NPAs stood at 0.17% & 0.04%, respectively in Q2FY13.

- There was no new restructuring in the current quarter and the bank’s restructured assets stood at 0.43% of gross advances at Rs 189.1 cr in Q3FY13.

- The bank has made provisions on the media account and provided ~90 cr (80% of exposure) during Q2/Q3FY13. On remaining 20% the bank does not anticipate further requirement of provisioning. Management expects 10- 15% recovery in short-term and another 20-25% in next 3-4quarters.

- Provisioning coverage ratio of the bank (including technical write off) stood at 79.6% in Q3FY13.

- RoA improved to 1.6% in Q3FY13 and RoE stood at 24.1%. Capital Adequacy Ratio of the Bank as on Q3FY13 stood at 18% with Tier I ratio of 9.02%.

- The bank added 12 new branches taking the total branch network to 412 in Q3FY13 and added approximately 29 ATMs in Q3FY13 resulting in increase in other operating expenses.