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22 April 2015
4QFY15 Result Update | Sector: Financials
Yes Bank
Alpesh Mehta ([email protected]); +91 22 3982 5415
Vallabh Kulkarni ([email protected]); +91 22 3982 5430
BSE SENSEX S&P CNX CMP: INR796 TP: INR950 (+19%) Buy 27,890 8,430 Bloomberg YES IN
Equity Shares (m) 417.7
M.Cap.(INR b)/(USD b) 332.5/5.3
52-Week Range (INR) 910/429
1, 6, 12 Rel. Per (%) -3/24/61
Avg Val(INRm)/Vol’000 2,584/4,029
Free float (%) 77.9
Financials & Valuation (INR b)
Y/E Mar 2015 2016E 2017E
NII 34.9 43.9 53.2
OP 32.5 40.8 50.8
NP 20.1 25.4 31.9
NIM (%) 3.1 3.2 3.1
EPS (INR) 48.0 60.9 76.4
EPS Gr. (%) 7.0 26.8 25.6
BV/Sh. (INR) 279.6 332 393
ABV/Sh. INR) 278.2 331 392
RoE (%) 21.3 19.9 21.1
RoA (%) 1.6 1.7 1.7
Payout (%) 20.3 20.3 20.3
Valuations
P/E(X) 16.6 13.1 10.4
P/BV (X) 2.8 2.4 2.0
P/ABV (X) 2.9 2.4 2.0
Div. Yield (%) 1.1 1.3 1.7
In-line performance; strong growth; uptick in restructured portfolio
n Yes Bank’s (YES) 4QFY15 PAT was in line with our estimate (+28% YoY) at INR5.5b. Strong customer assets growth (+11% QoQ and +25% YoY), continued strength in fee income (+33% YoY) and 30bp YoY decline in cost of funds led to healthy PPP growth of 38% YoY.
n GNPAs/NNPAs remained stable QoQ at 0.42%/0.12% respectively. However, restructured loans increased sharply to 50bp v/s 26bp in 3QFY15 (a road sector account restructured during the quarter). Thus, NSL increased to 62bp v/s 36bp in 3QFY15, however, remains one of the lowest in the industry.
n Loan book growth remains strong (+13% QoQ and 36% YoY) led by strong growth in branch banking (SME + Retail) business (28% QoQ and +31% YoY). Proportion of credit substitutes declined to a 15-quarter low of 13.3% of customer assets.
n Other highlights: (1) Provisions beat (INR1.3b v/s est. of INR743m) on account of INR510m counter cyclical provisioning, (2) strong sequential growth in SA deposits (+16% QoQ, +35% YoY), led to 50bp QoQ improvement in CASA ratio to 23.1% and (3) CET 1 remains comfortable at ~11%, though capital consumption over the last few quarters was high. YES plans to raise USD1b capital over the next 12 months.
n Valuation and view: With economic indicators turning positive, the bank is better positioned with (1) strong capitalization (CET I of ~11%), (2) higher branch presence (630 v/s 214 in FY11) and (3) best-in-class asset quality. With the higher share of bulk liabilities and corporate investment portfolio, YES would continue to benefit from a falling interest rate cycle. We largely maintain the earnings estimate and expect return ratios to be strong, with RoA of 1.7%+ and RoE of 20%+. Reiterate Buy with a target price of INR950 (2.4x FY17E BV).
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
22 April 2015 2
Yes Bank
Exhibit 1: YES Bank: Quarterly performance vs expectation Y/E MARCH (INR m) 4QFY15A 4QFY15E Var. (%) Comments
Net Interest Income 9,771 9,575 2 Better than expected loan growth; Strong re-pricing benefit resulting in 30bp QoQ decline in cost of funds % Change (Y-o-Y) 36 33
Other Income 5,904 5,788 2
Net Income 15,675 15,363 2 Operating Expenses 6,300 6,455 -2
Operating Profit 9,375 8,908 5 Beat on PPP led by lower costs and marginally higher core income % Change (Y-o-Y) 38 31
Other Provisions 1,264 843 50 Higher than expected countercyclical provisions (INR510m)
Profit before Tax 8,111 8,065 1 Tax Provisions 2,602 2,473 5
Net Profit 5,510 5,592 -1 PAT largely inline as lower than expected opex compensated by higher provisioning % Change (Y-o-Y) 28 30
Source: MOSL, Company
NIM stable QoQ; Branch banking driving loan growth n Despite 200bp increase in CD ratio, reported NIM remained stable QoQ at 3.2%.
Re-pricing benefit on liabilities was evident as the cost of funds declined 30bp QoQ, but was compensated by 20bp QoQ decline in yield on loans leading to stable NIM.
n Loans grew 13% QoQ and 36% YoY led by strong growth in Branch banking (SME + Retail) loan book (+28% QoQ and +31% YoY). Share of retail banking in overall loans increased to 35.3% as compared to 31.3% in 3QFY15.
n Post a double digit growth last quarter, credit substitute portfolio declined by 2% QoQ to INR116b in 4QFY15 (-2% QoQ and -17% YoY). Hence, the overall growth in customer assets (11% QoQ and 25% YoY) was lower as compared to advances growth. Share of credit substitute as a percentage of customer assets decreased to 13.3% as compared to 15.1% in 3QFY15 and 20.1% in 4QFY14.
n YES’s monthly average Liquidity coverage ratio (LCR) of 80% is above the regulatory requirement of 60%.
Continued traction in non-interest income led by Financial markets and Third Party Distribution n Non-interest income grew 33% YoY (+10% QoQ) led by financial markets (+116%
YoY and +17% QoQ) and third party distribution (+34% YoY and +49% QoQ). Transaction banking fees increased 17% YoY and 19% QoQ.
n Contribution from lumpy financial advisory fee remained high at 35% of overall non-interest income – a concern.
Exhibit 2: Improved traction in TPP, transaction banking fees and financial markets
4QFY15 3QFY15 QoQ Gr. (%) 4QFY14 YoY Gr. (%)
Non Interest Income 5,904 5,368 10 4,455 33
Financial Markets 1,168 996 17 540 116
Financial Advisory 2,087 2,328 -10 1,762 18
Transaction banking 1,560 1,315 19 1,338 17
Third party distribution 1,089 729 49 815 34
Source: Company, MOSL
Loan growth remained strong (+13% QoQ; +36% YoY); Proportion of credit
substitutes in customer assets declined to 13.3%
Financial markets income grew 17% QoQ and 116%
YoY
Pick up in retail and other fees is encouraging, higher
share of lumpy fees is a concern
22 April 2015 3
Yes Bank
SA growth remains strong; CASA ratio improves QoQ n SA deposits grew 16% QoQ (+35% YoY). Resultantly, proportion of SA deposits
increased by 58bp QoQ to 13.8%. Blended SA deposits cost was stable QoQ at 7% in 4QFY15. Tweaking of category threshold to INR0.3m is expected to aid SA cost going forward.
n Management efforts in building granular liability book is showing fruits as the share of retail deposits has increased to 47.9% from 45.4% a quarter ago and 42% a year ago.
n CA deposits grew 21% YoY (+10% QoQ) and overall CASA grew 13% QoQ and 29% YoY. CASA ratio improved to 23.1% as compared to 22.6% in 3QFY15 and 22% in 4QFY14.
Headline GNPA stable; Sharp uptick in Restructured portfolio n Asset quality performance continues to be strong with GNPA% and NNPA % at
41bp (stable QoQ) and 12bp (stable QoQ). Slippages declined QoQ to ~INR520m from INR687m in 3QFY15 (INR3.9b in FY15).
n Bank did not sell any assets to ARCs during the quarter. PCR declined to 72% as compared to 77% a quarter ago.
n Restructured loan portfolio witnessed sharp uptick to 50bp from 26bp in 3QFY15 (One roads sector account restructured during the quarter). Resultantly net stress loans increased to 62bp vs 36bp in the previous quarter however remains one of the lowest in the industry.
Other highlights n During the quarter, YES added 30/34 branches/ATMs increasing the
branch/ATM network to 630/1,190. n RWA grew 7% QoQ (+36% YoY) v/s customer assets growth of 11% QoQ (+25%
YoY); CET I capital stood at 11% (Total CAR at 15.6%) n Bank’s board has approved capital raising plan of upto US$1b by way of QIP or
any other international offering such as ADR/GDR. Bank is yet to take shareholder approval.
Conference call highlights
Macro-economic outlook n Developments over the last couple of months such as Coal auctions, Telecom
Spectrum, passage of Mines and Minerals bills would take care of a lot of legacy issues. Management now has a reasonable visibility of economy improving from 2HFY16.
n Bank expects 50-75bp cut in repo rate by RBI in FY16 n Internal lead indicators pointing northwards; Upgrades are now higher than
downgrades in internal ranking system over last 2-3 quarters
Balance sheet related n Loan growth to remain strong over FY16, may exceed FY15 growth numbers.
Apart from branch banking, growth would emanate from corporate banking as well. In situations of excess growth, bank may look at partial sell down in corporate book.
n SA deposits growth remained strong in FY15. Despite realigning of SA thresholds, management expects to clock ~40% growth in SA deposits.
Strong growth in SA deposits led to a 50bp QoQ improvement in CASA ratio
Despite higher restructuring during the quarter, net
stressed loans remain one of the lowest in the industry
22 April 2015 4
Yes Bank
n Bank has not bought any assets through PTC structure for PSL purpose in FY15. PTCs bought in the earlier years are gradually running down and form just 4% of the total PSL requirements. Going forward, except direct agriculture sub-target, bank aims to meet PSL requirements through organic means.
Asset Quality n RL portfolio increased to 50bp vs. 26bp in 3QFY15. An account in road projects
segment was restructured due to 3-6 months delay in commencement of projects
n Provisions break up (INR1.3b in 4QFY15) –NPA provisions (INR126m), General Provisions (INR470m), Counter cyclical provisions (INR510m), UFCE and other regulatory provisions (INR160m).
n Provision break up (INR3.4b in FY15) – NPA provisions (INR1.3b), General provisions (INR980m), Countercyclical provisions (INR1.05b) and UFCE and other regulatory provisions (INR500m).
n Full year NPA movement – Slippages (INR3,875m), recoveries and upgrades (INR1,960m), write-offs (INR530m)
n Steel sector – Exposure (including credit substitutes and bonds) of 3.3% out of which 2/3rd of the portfolio is rated AA or better.
P&L Related n Transaction banking and retail banking fees showing steady improvement with
higher branches and better customer acquisition along with improved cross sell opportunities (cross sell ratio of 2, aim to increase the same to 3 over next 5 years)
n About 45% of fee income is not linked to credit exposures. n Bank is already using marginal cost of funding to compute base rates. Capital
raised in 1QFY15 resulted in NIM improvement of 25bp which was partially offset by higher Liquidity coverage ratio needs and increased leverage accounted for 6-8bp
Capital raising n Bank has taken board approval for raising USD1b and would take the
Shareholder approval in June 2015. However, there is no urgency to raise capital currently (Internal Tier-1 threshold of 9.5-10%) which would last for another 12-18 months. However, given better availability of capital currently, the bank is considering and pursuing sponsored ADR (Level 1) through JP Morgan.
Data points n Five year plan: (a) CASA of 35-40% (b) Loan growth CAGR of 20-30% (c) Branch
additions of 15-20% per annum (d) Additions of 2,500 employees per annum (e) Corporate-branch banking mix of 50:50.
n No loans sold to ARCs during the quarter n Outstanding counter cyclical provisions at 50bp n Average yield on core credit substitute book (ex-RIDF) is 10.0% n Bank would launch its credit cards business in FY16
Valuation and view n YES has navigated well even during the toughest period of economic
environment. Now with economic indicators are turning positive YES is well positioned to leverage on to the opportunity that Indian economy presents with (1) strong capitalization (CET I of 11.0%), (2) rapid branch expansion (630 v/s 214 in FY11) and (3) best in class asset quality (62bp NSL lowest in the industry).
Reiterate Buy with a target price of INR950
(2.4x FY17 BV)
22 April 2015 5
Yes Bank
n Comfortable liquidity, low inflation and bulk deposit rate is a significant positive for YES from NIMs (higher short term liabilities) and bond gains perspective (~14% share of corporate bonds in customer assets). Stable NIM and traction in fees will keep core PPP and earnings CAGR strong at 27% each over FY15/18E.
n YES has a well-laid strategy for growing small business loans (most of which qualify as priority sector loans) and cross-selling to acquired customers which would help granular retail fees growth.
n On balance-sheet front, initial focus of the bank will be on growing the liability side first and as customer relationships age, focus would be on cross-selling its retail assets. The bank has been expanding its branch network at an increasing pace. On an average, it has added 90-100 branches per year over FY11-15, up from an average of 40 branches per year over FY06-11. Going forward, management aims to add ~100-150 branches per year.
n Asset quality performance remains impeccable; however we conservatively factor in higher credit cost of 0.35-0.4% over FY15-18. This is expected to be compensated by improvement in core income and better net investment gains. Further, strong PCR of 72% and floating provisions of 0.5% on loans provide cushion on our earnings estimates.
n Return ratios are expected to remain healthy with RoA at 1.7% and RoE at 20%+. Reiterate Buy with a target price of INR950 (2.4x FY17E BV).
Exhibit 3: We largely maintain our estimates INR B Old Est. New Est. % Change FY16 FY17 FY16 FY17 FY18 FY16 FY17 Net Interest Income 43.0 53.6 43.9 53.2 66.7 2.0 -0.8 Other Income 25.4 32.3 25.5 32.6 41.2 0.4 0.7 Total Income 68.4 85.9 69.4 85.7 107.9 1.4 -0.2 Operating Expenses 28.8 35.1 28.6 34.9 42.6 -0.7 -0.6 Operating Profits 39.6 50.8 40.8 50.8 65.2 2.9 0.1 Provisions 3.6 5.4 3.9 4.6 5.9 PBT 36.0 45.4 36.9 46.3 59.3 2.3 1.8 Tax 11.0 13.9 11.4 14.3 18.4 4.0 3.5 PAT 25.0 31.6 25.4 31.9 40.9 1.6 1.1 Margins (%) 3.2 3.2 3.2 3.1 3.1 Credit Cost (%) 0.4 0.4 0.4 0.3 0.3 RoA (%) 1.7 1.7 1.7 1.7 1.7 RoE (%) 19.7 21.1 19.9 21.1 22.7
Source: MOSL, Company
Exhibit 4: Exhibit 4: One year forward P/BV
Source: MOSL, Company
Exhibit 5: One year forward P/E
Source: MOSL, Company
Expect strong earnings CAGR of 27% over FY15-18; ROEs expected to be 20%+
22 April 2015 6
Yes Bank
Exhibit 6: DuPont: Return ratios to improve driven by strong core operating performance (%) Y/E March FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E Net Interest Income 2.24 2.35 2.55 2.66 2.61 2.44 2.57 2.61 2.85 2.89 2.83 2.83 Core Fee Income 2.41 2.15 1.45 1.61 1.40 1.24 1.28 1.49 1.51 1.54 1.60 1.62
Fee to core Income (%) 50.27 43.63 30.47 34.98 35.80 33.13 31.69 35.05 33.52 33.59 34.99 35.46 Core Income 4.65 4.50 4.00 4.27 4.02 3.67 3.84 4.11 4.36 4.43 4.43 4.45 Operating Expenses 2.54 2.43 2.10 1.69 1.43 1.41 1.55 1.68 1.86 1.88 1.86 1.81
Cost to Core Income (%) 54.46 53.97 52.48 39.54 35.47 38.30 40.19 40.96 42.76 42.53 41.95 40.64 Employee cost 1.54 1.44 1.09 0.87 0.76 0.72 0.76 0.75 0.80 0.81 0.81 0.81 Core operating Profits 2.12 2.07 1.90 2.58 2.59 2.27 2.30 2.42 2.49 2.54 2.57 2.64 Trading and others 0.14 0.42 0.75 0.33 -0.10 0.06 0.18 0.16 0.16 0.15 0.14 0.13 Operating Profits 2.26 2.49 2.65 2.91 2.50 2.32 2.48 2.58 2.65 2.69 2.71 2.76 Provisions 0.38 0.31 0.31 0.46 0.21 0.14 0.25 0.35 0.28 0.26 0.24 0.25
NPA 0.00 0.02 0.29 0.30 0.08 0.02 0.17 0.13 0.11 0.20 0.18 0.19 PBT 1.88 2.18 2.34 2.45 2.29 2.19 2.23 2.24 2.37 2.43 2.46 2.51 Tax 0.65 0.76 0.81 0.84 0.77 0.71 0.72 0.68 0.74 0.75 0.76 0.78
Tax Rate (%) 34.30 34.74 34.79 34.24 33.42 32.62 32.46 30.46 31.09 31.00 31.00 31.00 RoA 1.24 1.42 1.52 1.61 1.52 1.47 1.51 1.55 1.64 1.68 1.70 1.73
Leverage (x) 11.23 13.34 13.55 12.58 13.86 15.66 16.48 16.10 13.04 11.87 12.39 13.07 RoE 13.88 19.00 20.65 20.27 21.13 23.07 24.81 25.02 21.33 19.90 21.07 22.66
Source: MOSL, Company
Exhibit 7: DuPont: Higher provisioning QoQ impacts profitability 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 Net interest income 2.49 2.60 2.75 2.74 2.64 2.65 2.62 2.74 2.73 3.03 3.04 3.01 Non-interest income 1.52 1.37 1.47 1.63 1.77 1.76 1.52 1.69 1.51 1.79 1.79 1.82 Operating Income 4.00 3.97 4.22 4.37 4.41 4.41 4.14 4.43 4.24 4.82 4.83 4.83 Cost/ income (%) 39.55 39.48 37.22 37.70 38.25 36.25 41.64 41.60 45.45 40.01 40.33 40.19 Operating cost 1.58 1.57 1.57 1.65 1.69 1.60 1.72 1.84 1.93 1.93 1.95 1.94 - Employee 0.82 0.82 0.76 0.75 0.81 0.73 0.76 0.78 0.82 0.85 0.85 0.81 - Others 0.77 0.75 0.81 0.90 0.88 0.87 0.96 1.07 1.10 1.08 1.10 1.14 Operating Profit 2.42 2.41 2.65 2.72 2.72 2.81 2.42 2.59 2.31 2.89 2.88 2.89 Provisions 0.16 0.16 0.27 0.42 0.39 0.71 0.05 0.27 0.09 0.42 0.23 0.39 PBT 2.26 2.25 2.38 2.31 2.33 2.10 2.36 2.31 2.23 2.47 2.65 2.50 Tax 0.73 0.73 0.77 0.75 0.73 0.64 0.73 0.68 0.65 0.76 0.84 0.80 ROAA (%) 1.53 1.52 1.61 1.56 1.60 1.46 1.63 1.64 1.58 1.71 1.80 1.70 Leverage (x) 15.73 15.66 15.46 16.20 16.61 15.81 14.92 14.87 12.42 10.51 10.62 11.16 ROAE (%) 24.04 23.79 24.91 25.22 26.65 23.13 24.38 24.32 19.59 17.95 19.16 18.96
Source: MOSL, Company
22 April 2015 7
Yes Bank
Story in charts
Exhibit 8: Strong loan growth continues driven by branch banking (SME + Retail - +18% QoQ)
331
342
359
380
385
420
439
470
479
477 50
3 556
590
620 666 75
5
2613 15 11 16
23 22 2424 14
1518 23 30 32 36
1QFY
12
1HFY
12
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
Loans (INR b) YoY Growth (%)
Source: Company, MOSL
Exhibit 9: Continued momentum in customer assets growth; Credit sub. declined 2% QoQ
438
461 49
3 540
558 60
4
613
615
638 69
6 713
720 785 87
2
2820
32 33 27 3124
1414
15 1617
23 25
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
Customer Assets (INR b) YoY Growth (%)
Source: Company, MOSL
Exhibit 10: Steady deposits growth..
436
441
469
492
502
523
564
670
652
676
681
742
761
801
824
912
44
1019
715 19 20
36 30 29 2111 17 19 21 23
1QFY
12
1HFY
12
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
Deposit (INR b) YoY Growth (%)
Source: Company, MOSL
Exhibit 11: …led by strong SA growth 1.
5
1.8
1.5
1.9 2.6 5.1
6.0 7.4 8.7
9.0
10.1
10.4
11.2
12.6
12.5
12.9
13.2
13.8
8.7
8.5
9.4
9.0 10.0
9.9
10.3
9.9 9.
6
10.0
10.0
10.0
9.7 9.
5
9.8
9.6
9.4 9.3
9MFY
11
FY11
1QFY
12
1HFY
12
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
SA (%) CA (%)
Source: Company, MOSL
Exhibit 12: Credit substitutes proportion on a decline (%)
11.2
16.1 18.0
17.6
21.9 22.2
21.3 22.1 21.8 22.4 21.2 20.1
17.3
13.9 15.1 13.3
1QFY
12
1HFY
12
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
Source: Company, MOSL
Exhibit 13: Reported NIM stable QoQ (%)
2.82.9
2.8 2.8 2.82.9
3.0 3.0 3.02.9 2.9
3.0 3.0
3.2 3.2 3.2
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
2QFY
15
3QFY
15
4QFY
15
Source: Company, MOSL
22 April 2015 8
Yes Bank
Story in charts
Exhibit 14: Traction in financial market income continues (INR m)
247 41
0
483 68
8 945
471
392
716
1,74
1
1,79
8
705
540
354
1,03
9
996 1,
168
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
2QFY
15
3QFY
15
4QFY
15
Source: Company, MOSL
Exhibit 15: Financial adv. income forms 40% of fees (INR m)
829 97
8
806 1,
020
1,02
5
1,19
6 1,62
4
1,65
6
1,43
6
1,24
0 1,63
0
1,76
2
1,97
5
2,11
4
2,32
8
2,08
7
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
2QFY
15
3QFY
15
4QFY
15
Source: Company, MOSL
Exhibit 16: Traction in retail fees continues (INR m)
157
143
187 256
217 30
6
311 49
0
362 51
6
442
815
525 58
3 729
1,08
9
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
2QFY
15
3QFY
15
4QFY
15
Source: Company, MOSL
Exhibit 17: Asset quality largely stable QoQ
0.17 0.20
0.20 0.22 0.
28
0.24
0.17 0.20 0.22 0.
28
0.39
0.31 0.33 0.
36 0.42
0.41
0.01
0.04
0.04
0.05
0.06
0.05
0.04
0.01
0.03
0.04
0.08
0.05
0.07
0.09
0.10
0.12
9580 80 79 78 80 80
93 88 8578 85 78 76 77 72
1QFY
12
1HFY
12
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
GNPA (%) NNPA (%) PCR (%)
Source: Company, MOSL
Exhibit 18: Restructured loans increased in 4QFY15 (bps)
26 51 49 53 51 46 43 31 29 26 21 18 19 19 26 50
1QFY
12
1HFY
12
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
OSRL
Source: Company, MOSL
Exhibit 19: Added 30 branches during the quarter (nos)
255 30
5
331
356
381
400
412
430 47
5
500
517 56
0
572
581
600
630
1QFY
12
1HFY
12
9MFY
12
FY12
1QFY
13
1HFY
13
9MFY
13
FY13
1QFY
14
1HFY
14
9MFY
14
FY14
1QFY
15
2HFY
15
9MFY
15
FY15
Source: Company, MOSL
22 April 2015 9
Yes Bank
Exhibit 20: Quarterly Snapshot (INR b) FY14 FY15 Variation (%) Cumulative Numbers 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q QoQ YoY FY14 FY15 YoY Gr (%) Profit and Loss (INR m) Net Interest Income 6,591 6,721 6,655 7,196 7,453 8,562 9,090 9,771 7 36 27,163 34,876 28 Other Income 4,421 4,461 3,879 4,455 4,136 5,056 5,368 5,904 10 33 17,216 20,465 19 Financial Markets 1,741 1,798 706 540 354 1,039 996 1,168 17 116 4,785 3,558 -26 Financial Advisory 1,436 1,240 1,630 1,762 1,975 2,114 2,328 2,087 -10 18 6,068 8,504 40 Transaction banking 882 907 1,101 1,338 1,282 1,320 1,315 1,560 19 17 4,228 5,477 30 Branch Banking 362 516 442 815 525 583 729 1,089 49 34 2,135 2,926 37 Total Income 11,012 11,182 10,533 11,651 11,589 13,618 14,458 15,675 8 35 44,378 55,341 25 Operating Expenses 4,212 4,053 4,386 4,847 5,267 5,449 5,831 6,300 8 30 17,498 22,847 31 Employee 2,012 1,853 1,941 2,038 2,247 2,390 2,541 2,619 3 28 7,844 9,797 25 Others 2,200 2,200 2,446 2,808 3,020 3,059 3,290 3,682 12 31 9,654 13,051 35 Operating Profits 6,800 7,129 6,147 6,804 6,322 8,169 8,627 9,375 9 38 26,880 32,494 21 Provisions 970 1,791 133 723 237 1,195 699 1,264 81 75 3,617 3,395 -6 PBT 5,830 5,338 6,014 6,082 6,085 6,974 7,929 8,111 2 33 23,263 29,099 25 Taxes 1,821 1,626 1,858 1,779 1,769 2,151 2,526 2,602 3 46 7,085 9,048 28 PAT 4,008 3,711 4,156 4,302 4,315 4,823 5,403 5,510 2 28 16,178 20,052 24 Asset Quality GNPA 1,049 1,321 1,958 1,749 1,980 2,224 2,787 3,134 12 79 NNPA 121 194 423 261 428 539 645 877 36 236 GNPA (%) 0.2 0.3 0.4 0.3 0.3 0.4 0.4 0.4 -1 10 NNPA (%) 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 2 7 PCR (Calculated, %) 88 85 78 85 78 76 77 72 -484 -1,309 Ratios (%) Cost to Income 38.3 36.2 41.6 41.6 45.4 40.0 40.3 40.2 39.4 41.3 Tax Rate 31.2 30.5 30.9 29.3 29.1 30.8 31.9 32.1 30.5 31.1 CASA (Reported) 20.2 20.4 20.9 22.0 22.3 22.5 22.6 23.1 Loan/Deposit 73.4 70.6 73.9 75.0 77.5 77.4 80.9 82.9 RoA 1.6 1.5 1.6 1.6 1.6 1.7 1.8 1.7 1.6 1.7 RoE 26.7 23.1 24.4 24.3 21.6 18.0 19.2 19.0 24.6 19.5 Margins (%) - Reported Yield on loans 12.3 12.4 12.6 12.4 12.5 12.2 12.2 12.0 -20 -40 12.4 12.2 -20 Cost of funds 8.3 8.5 8.6 8.4 8.5 8.3 8.1 7.8 -30 -60 8.5 8.2 -28 Margins 3.0 2.9 2.9 3.0 3.0 3.2 3.2 3.2 0 20 3.0 3.2 20 Balance Sheet (INR B) Loans 479 477 503 556 590 620 666 755 13 36 Investments 418 406 399 410 406 441 459 466 2 14 Deposits 652 676 681 742 761 801 824 912 11 23 CASA Deposits 132 138 142 163 170 180 186 211 13 29 Borrowings 215 179 192 213 171 196 235 262 11 23 Total Assets 1,008 1,022 1,014 1,090 1,097 1,162 1,233 1,362 10 25 Risk Weighted Assets 589 714 725 763 846 902 970 1,035 7 36 Other Details Branches 475 500 517 560 572 581 600 630 Employees 7,458 7,998 8,645 8,798 9,051 9,612 9,887 10,810
Source: MOSL, Company
22 April 2015 10
Yes Bank
Exhibit 21: Financials: Valuation metrics 62.34 Rating CMP Mcap EPS (INR) P/E (x) BV (INR) P/BV (x) RoA (%) RoE (%)
(INR) (USDb) FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17
ICICIBC* Buy 313 29.0 23.0 27.1 10.8 8.8 131 150 1.89 1.59 1.63 1.64 15.8 16.4
HDFCB Buy 1,015 40.4 51.3 62.6 19.8 16.2 285 333 3.56 3.05 2.03 2.03 19.3 20.2
AXSB Buy 540 20.4 37.5 44.0 14.4 12.3 219 255 2.47 2.12 1.79 1.75 18.4 18.5
KMB* Neutral 1,360 16.8 49.2 60.4 27.6 22.5 371 427 3.67 3.18 1.86 1.86 14.3 15.0
YES Buy 796 5.3 60.4 76.2 13.2 10.4 330 391 2.41 2.04 1.70 1.73 19.7 21.1
IIB Buy 846 7.2 43.2 54.6 19.6 15.5 227 274 3.72 3.08 1.90 1.97 20.7 21.8
DCBB Buy 121 0.5 7.3 9.5 16.6 12.7 63 72 1.92 1.67 1.12 1.17 12.3 14.1
FB Buy 128 1.8 13.0 15.6 9.8 8.2 100 112 1.28 1.14 1.20 1.19 13.7 14.7
JKBK Neutral 99 0.8 13.6 18.1 7.3 5.5 137 151 0.72 0.66 0.81 0.95 10.4 12.6
SIB Buy 25 0.5 3.7 4.7 6.8 5.4 29 33 0.86 0.77 0.78 0.86 13.3 15.2
Private Aggregate 122.7 17.2 14.3 2.77 2.41
SBIN (cons)* Buy 284 34.0 29.0 36.2 9.4 7.5 231 260 1.18 1.04 0.77 0.84 12.8 14.5
PNB Buy 162 4.7 26.8 36.2 6.0 4.5 231 263 0.70 0.61 0.77 0.91 12.2 14.6
BOI Neutral 222 2.3 50.3 64.3 4.4 3.5 455 511 0.49 0.43 0.46 0.49 11.6 13.3
BOB Neutral 180 1.2 24.1 30.8 7.5 5.9 184 208 0.98 0.87 0.70 0.78 13.7 15.7
UNBK Buy 156 1.6 36.6 47.1 4.3 3.3 320 359 0.49 0.44 0.57 0.64 12.0 13.9
INBK Buy 160 1.2 28.7 33.5 5.6 4.8 287 313 0.56 0.51 0.63 0.63 10.4 11.2
CRPBK Neutral 59 0.2 16.5 21.9 3.6 2.7 141 158 0.42 0.37 0.54 0.64 12.3 14.7
ANDB Buy 79 0.7 17.9 22.5 4.4 3.5 169 185 0.47 0.43 0.55 0.60 11.0 12.7
IDBI Neutral 81 2.1 14.4 19.7 5.6 4.1 157 173 0.51 0.46 0.58 0.69 9.5 11.9
DBNK Neutral 51 0.4 9.7 13.6 5.2 3.8 130 141 0.39 0.36 0.36 0.44 7.7 10.0
Public Aggregate 48.5 7.8 6.1 0.85 0.77
HDFC* Buy 1,279 32.0 38 46 21.7 16.5 165 192 5.05 3.94 2.53 2.53 23.8 24.9 LICHF Buy 442 3.6 33 39 13.4 11.3 198 229 2.23 1.92 1.43 1.42 17.8 18.3 IHFL Buy 561 3.3 64 79 8.8 7.1 215 246 2.61 2.28 4.23 4.29 32.4 34.3
IDFC Buy 167 4.2 13 14 13.2 11.6 109 120 1.26 1.14 2.20 2.19 11.5 12.0
RECL Buy 326 5.2 66 75 4.9 4.3 300 358 1.09 0.91 3.50 3.36 24.2 22.8
POWF Buy 277 5.9 55 63 5.0 4.4 288 334 0.96 0.83 3.18 3.11 20.6 20.1
SHTF Buy 1,041 3.8 78 92 13.4 11.4 494 573 2.11 1.82 2.27 2.44 16.3 17.7
MMFS Neutral 277 2.5 18 21 15.8 12.9 113 128 2.45 2.16 2.61 2.76 16.5 17.7
BAF Buy 4,266 3.4 219 267 19.5 16.0 1,137 1,360 3.75 3.14 2.94 2.88 21.0 21.4
NBFC Aggregate 63.8 14.8 12.8 2.74 2.39
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
22 April 2015 11
Yes Bank
Financials and valuations
Income Statement
(INR Million) Y/E March 2011 2012 2013 2014 2015 2016E 2017E 2018E
Interest Income 40,417 63,074 82,940 99,814 115,720 143,930 177,221 224,302 Interest Expense 27,948 46,917 60,752 72,651 80,842 100,076 124,055 157,651
Net Interest Income 12,469 16,156 22,188 27,163 34,878 43,855 53,165 66,651 Change (%) 58.2 29.6 37.3 22.4 28.4 25.7 21.2 25.4
Non Interest Income 6,233 8,571 12,574 17,216 20,465 25,507 32,558 41,205
Net Income 18,702 24,728 34,762 44,378 55,343 69,362 85,723 107,856 Change (%) 37.2 32.2 40.6 27.7 24.7 25.3 23.6 25.8
Operating Expenses 6,798 9,325 13,345 17,499 22,847 28,559 34,883 42,625
Pre Provision Profits 11,904 15,402 21,417 26,880 32,496 40,803 50,841 65,231 Change (%) 37.9 29.4 39.1 25.5 20.9 25.6 24.6 28.3
Provisions (excl tax) 982 902 2,160 3,617 3,395 3,947 4,567 5,937
PBT 10,922 14,500 19,257 23,263 29,101 36,856 46,274 59,294 Tax 3,650 4,730 6,251 7,085 9,048 11,425 14,345 18,381 Tax Rate (%) 33.4 32.6 32.5 30.5 31.1 31.0 31.0 31.0
PAT 7,271 9,770 13,007 16,178 20,054 25,430 31,929 40,913 Change (%) 52.2 34.4 33.1 24.4 24.0 26.8 25.6 28.1
Equity Dividend (Incl tax) 1,012 1,641 2,510 3,397 4,088 5,185 6,509 8,341
Core PPP* 12,367 15,024 19,860 25,218 30,584 38,591 48,279 62,269 Change (%) 61.7 21.5 32.2 27.0 21.3 26.2 25.1 29.0
*Core PPP is (NII+Fee income-Opex) Balance Sheet
(INR Million) Y/E March 2011 2012 2013 2014 2015 2016E 2017E 2018E
Equity Share Capital 3,471 3,530 3,586 3,606 4,177 4,177 4,177 4,177 Reserves & Surplus 34,469 43,236 54,490 67,611 112,623 134,659 160,079 192,650
Net Worth 37,941 46,766 58,077 71,217 116,800 138,837 164,256 196,828
Deposits 459,389 491,517 669,556 741,920 911,759 1,167,051 1,493,825 1,941,973 Change (%) 71.4 7.0 36.2 10.8 22.9 28.0 28.0 30.0
of which CASA Dep 47,509 73,921 126,875 163,447 210,790 282,124 378,102 504,227 Change (%) 68.6 55.6 71.6 28.8 29.0 33.8 34.0 33.4
Borrowings 66,909 141,565 209,221 213,143 262,204 288,991 332,785 383,598 Other Liabilities & Prov. 25,831 56,409 54,187 63,877 70,942 77,709 93,221 111,954
Total Liabilities 590,070 736,257 991,041 1,090,158 1,361,704 1,672,587 2,084,087 2,634,352 Current Assets 34,960 35,855 40,658 58,917 75,572 77,081 98,312 124,090
Investments 188,288 277,573 429,760 409,503 466,052 535,960 616,354 739,625 Change (%) 84.4 47.4 54.8 -4.7 13.8 15.0 15.0 20.0
Loans 343,636 379,886 469,996 556,330 755,498 982,148 1,276,792 1,659,830 Change (%) 54.8 10.5 23.7 18.4 35.8 30.0 30.0 30.0
Fixed Assets 1,324 1,771 2,295 2,935 3,190 3,727 4,224 4,722 Other Assets 21,861 41,170 48,332 62,473 61,392 73,671 88,405 106,086
Total Assets 590,070 736,257 991,041 1,090,158 1,361,704 1,672,587 2,084,087 2,634,352
Asset Quality (%) GNPA (INR m) 805 839 943 1,749 3,134 4,457 5,683 7,155
NNPA (INR m) 92 175 70 261 877 1,159 997 64
GNPA Ratio 0.23 0.22 0.20 0.31 0.41 0.45 0.44 0.43
NNPA Ratio 0.03 0.05 0.01 0.05 0.12 0.12 0.08 0.00
PCR (Excl Tech. write off) 88.6 79.2 92.6 85.1 72.0 74.0 82.5 99.1
E: MOSL Estimates
22 April 2015 12
Yes Bank
Financials and valuations
Ratios Y/E March 2011 2012 2013 2014 2015 2016E 2017E 2018E
Spreads Analysis (%) Avg. Yield-Earning Assets 9.3 10.5 10.5 10.6 10.4 10.4 10.3 10.3 Avg. Yield on loans 10.6 12.2 12.7 12.7 12.2 12.1 11.9 11.8 Avg. Yield on Investments 7.1 7.9 8.1 8.1 8.0 7.5 7.3 7.3 Avg. Cost-Int. Bear. Liab. 6.6 8.1 8.0 7.9 7.6 7.6 7.6 7.6 Avg. Cost of Deposits 6.3 8.1 7.9 8.0 7.6 7.6 7.4 7.4 Interest Spread 2.7 2.4 2.5 2.7 2.8 2.7 2.7 2.7 Net Interest Margin 2.9 2.7 2.8 2.9 3.1 3.1 3.1 3.1
Profitability Ratios (%) RoE 21.1 23.1 24.8 25.0 21.3 19.9 21.1 22.7 RoA 1.5 1.5 1.5 1.6 1.6 1.7 1.7 1.7 Int. Expense/Int.Income 69.1 74.4 73.2 72.8 69.9 69.5 70.0 70.3 Fee Income/Net Income 35.8 33.1 31.7 38.8 37.0 36.8 38.0 38.2
Efficiency Ratios (%) Cost/Income* 35.5 38.3 40.2 41.0 42.8 42.5 41.9 40.6 Empl. Cost/Op. Exps. 53.3 51.0 49.1 44.8 42.9 42.9 43.9 44.9 Busi. per Empl. (INR m) 164.5 148.4 143.1 138.5 137.2 152.9 165.3 181.6 NP per Empl. (INR lac) 18.5 17.3 18.5 18.4 18.6 20.4 21.5 23.3
* ex treasury
Asset-Liability Profile (%) Loans/Deposit Ratio 74.8 77.3 70.2 75.0 82.9 84.2 85.5 85.5 CASA Ratio 10.3 15.0 18.9 22.0 23.1 24.2 25.3 26.0 Investment/Deposit Ratio 41.0 56.5 64.2 55.2 51.1 45.9 41.3 38.1 CAR 16.5 17.9 18.3 14.4 15.6 13.9 12.8 11.6 Tier 1 9.7 9.9 9.5 9.8 11.5 10.6 9.9 9.1
Valuation
Book Value (INR) 109.3 132.5 161.9 197.5 279.6 332.4 393.2 471.2 Change (%) 20.2 21.2 22.2 21.9 41.6 18.9 18.3 19.8 Price-BV (x) 4.9 4.0 2.8 2.4 2.0 1.7
Adjusted BV (INR) 109.1 132.2 161.8 197.0 278.2 330.5 391.7 471.1 Price-ABV (x) 4.9 4.0 2.9 2.4 2.0 1.7
EPS (INR) 20.9 27.7 36.3 44.9 48.0 60.9 76.4 97.9 Change (%) 48.9 32.1 31.0 23.7 7.0 26.8 25.6 28.1 Price-Earnings (x) 21.9 17.7 16.6 13.1 10.4 8.1
Dividend Per Share (INR) 2.5 4.0 6.0 8.0 8.4 10.7 13.4 17.1 Dividend Yield (%) 0.8 1.0 1.1 1.3 1.7 2.2
E: MOSL Estimates
22 April 2015 13
Yes Bank
Corporate profile
Exhibit 23: Shareholding pattern (%) Mar-15 Dec-14 Mar-14
Promoter 22.1 22.1 25.6
DII 20.7 20.1 21.0
FII 45.1 46.3 38.0
Others 12.2 11.5 15.5 Note: FII Includes depository receipts
Exhibit 24: Top holders
Holder Name %
Holding Life Insurance Corporation Of India Along With Its
7.3
Morgan Stanley Asia (Singapore) Pte 2.8
DB International (Asia) Ltd 2.6
Franklin Templeton Investment Funds 2.5 Goldman Sachs (Singapore) Pte 2.1
Exhibit 25: Top management
Name Designation
Rana Kapoor Managing Director & CEO
Pralay Mondal Sr. Group President –Branch, Retail & Business Banking
Rajat Monga Sr. Group President –Financial Markets & Chief Financial Officer
Ashish Agarwal Group President and Chief Risk Officer
Amit Kumar Group President and Country Head –Corporate and Commercial Banking
Exhibit 26: Directors Name Name
Radha Singh* Mukesh Sabharwal*
Rana Kapoor Vasant V Gujarathi*
Ajay Vohra* Saurabh Srivastava*
Ravish Chopra M R Srinivasan
Diwan Arun Nanda* Brahm Dutt*
*Independent
Exhibit 27: Auditors
Name Type
S R Batliboi & Co LLP Statutory
Exhibit 28: MOSL forecast v/s consensus EPS
(INR) MOSL
forecast Consensus
forecast Variation
(%)
FY16 60.9 59.4 2.5 FY17 76.4 74.6 2.4 FY18 97.9 - -
Company description Yes Bank, a private bank incorporated in 2003, is promoted and led by Mr. Rana Kapoor, who is currently the MD & CEO of the bank. Yes Bank has steadily built a full-service commercial bank with Corporate, Retail and SME Banking platforms, with a comprehensive product suite. It was the first bank to offer differentiated rates on savings account following RBI's deregulation of savings account rates in October 2011. The number of branches and ATMs stood at 630 (doubled in last 3 years) and 1,190 (quadrupled in the last 3 years) respectively.
Exhibit 22: Sensex rebased
22 April 2015 14
Yes Bank
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Motilal Oswal Securities Ltd
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025 Phone: +91 22 3982 5500 E-mail: [email protected]
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