Yes bank

(Hitesh Patel) #1

Yes bank has been one of the fastest growing private sector banks ably managed by Rana Kapoor who is a respected name in banking circles.

Cmp 346 market cap 12280 crores

Financials for last few yrs.







Q1 fy 13








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Capital adequacy as on q1 fy 13 at 16.53%

ROA 1.5%

Gross npa 109.5 crores (0.28%)

Net npa 23.72 crores (0.06%)

yes bank has till now shown scorching growth and even now on is likely to show 25-30% cagr growth.

few negatives I see are:

1. Looking at the pace of growth, bank will in not too distant future have to raise capital which might dilute equity..

2. CASA ratio -- current and savings account ratio is low for this bank. Even after the recent hike in savings deposit rate is 16.3% which is far below the levels of 30 plus for banks like HDFC bank and SBI. Bank's cost of borrowing is close to 9%.

3. Till now, non interest income has shown exemplary growth but how long this sustains needs to be seen.

4. Net interest margins as compared to hdfc bank and other top notch banks is lower. I guess this is more due to higher cost of funds.

Coming to positives,

1. Based on FY 13 projections, Yes bank seems to be attractively priced at a PE of less than 10, price to book of around 2.15

2. It has one of the best asset quality in the banking space. Gross NPA and net NPA figures are very good.

3. It has ROE of around 23-24.

Looking at the track record, quality of management and the asset quality, Yes Bank looks an ideal candidate for an aggressive long term core portfolio holding.

(hemant gupta) #2

I like this and own this. Have concerns on their casa ratio. If they could sort that out, we could have another hdfc bank in the making.

(Vinod MS) #3


Yes Bank definitely has solid nos. The performance so far was driven by products catering to the corporate segment. The low gross NPA inspite of giving loans to SMEs and other corporates is outstanding.

But, I have the foll concerns:

  1. Need to understand their share of restrcutured loans. Bank had great flexibility to restructure loans thus far and that meantprovisioning for such loanscould be managed to certain extend. But RBI’s new rules will lead higher provisioning means that a higher provisioning is required for restructured loans

  2. Yes Bank has not focused on retail segment so far and that is why the CASA ratio is inferior. But that was their strategy for the first leg of growth. Now we can see huge marketing exercise for building the retail portfolio. Retail is very different in terms of marketing tactics, customer serivce, product design etc. It needs to be seen how the bank will compete with ICICI, Axisand HDFC Bank in this space.

It needs a much larger branch network, take a hit on margins to offer higher savings rate, build a very good presence in the “salary a/c” segment and spent much more on ads. Will this lead to lower profits for the interim period as there will be lag effect? I think so.

How may of us have felt the need to/have been approached by YES Bank to open a S/B a/c with them?

But definitely a counter to watch and track the retail growth.



(Abhishek Basumallick) #4

My logic in investing in Yes Bank a couple of years back was that this was a relatively small bank with a possibility of scaling up fast (>25%) for the next 10 years. It was managed well and continues to be so. They don’t go into large ticket loans so have a relatively safer book on that front.

YB came to my company to get new accounts (we have over 100,000 employees in India) so I can imagine that they would be doing similar stuff at other companies as well.

As far as I see, YB is a good long term bet. Will it be the next HDFC Bank? I don’t know! Even if it halfway there, I will have nothing to complain.

(Hitesh Patel) #5

There seem to be two likely candidates for this slot – of being future hdfc bank

yes bank and indusind bank.

One can compare them both and there are a lot of similarities except valuations where indusind is slightly more expensive as compared to yes bank. that may be due to market perception about both stocks. I guess instead of too much bheja frying, one can buy both.

(Vijay Gawde) #6

I agree with Hitesh - **Pair **of Yes bank and Indusind Bank is best fit investment bet in Banking !!

(biju john) #7


Whats the view on Axis bank,close to 10 p/e trailing,think the NPA fears are overdone,how would you compare that with the other two.They also have good fee income

(Hitesh Patel) #8

Yes bank has again come out with good q2 fy 13 results.

asset quality remains very healthy. CASA seems to be on improvement track. Management expects to take it up to 20% by end of FY 13. (current accounts should be monitored here bcos that gives the bank access to funds at almost zero interest rates.)

All in all I think the stock seems to be a good long term pick.

(Abhishek Basumallick) #9

Yes Bank is my favourite pick in the private banking space. Axis is good too, and they are making provisions for their NPAs and also integrating Enam, which should increase their fee income going forward. Given their retail presence, Axis should also do very well in the future.

(biju john) #10

there is intense competition for the current account part of CASA,some banks offers a sweep in account for CA account holders where an amount above a threshhold is transferred to a FD.Many of the customers are not aware of it and banks will not offer it.But they would offer it as a last ditch effort and then there are some more smarter CA holders who move their surplus money to a liquid mutual fund.Therefore the days of low cost funds are over and i think the guys who earn a good fee income should do well.It is just my feeling that axis is not as stringent as HDFC bank/Kotak while lending out.

(manish) #11

Yes bank wins the Golden Peacock Global award.

At 420 it is quoting approx at PE 13 for FY 13 est earnings.

I feel the stock can deliver 25-30 % returns with a chance of PE re-rating once there is clarity on the issue of CASA and NPA fm Kingfisher / DCHL.

(Soumya Kanta Panigrahi) #12

An perspective about Yes Bank’s innovation, ethics, and how it has managed to grow so fast without compromises.

I think this is one stock in my portfolio that I can sleep on for next few years.

You just have to visit their bank branches to feel the difference. I am a customer and I feel privileged being one.

Well educated, highly motivated employees/representatives are a norm here.

As I was speaking to one of their employes he seemed confident of doubling CASA at his branch every six months. Atleast that is the case since they have increased their interest on savings account’s to 7%.

The idea is simple, explain the person that he gains almost 3/4 more on the interest amount that he is currently getting. For the salaried ones it is one click away at the starting of the month.

(Soumya Kanta Panigrahi) #13

I would like to believe that this one fits well into Donald’s safety net pretty well.Also it fits well into Prasad’s 10 years 10 times criteria.

(biju john) #14

Yes bank seems to be a good bet,but if we look at the increase in savings rate

if a existing branch had a book of 10 cr before the rate cut,with 4.5% savings rate and assumed lending rate of 12.5%,his annual income would have been 0.08*10 cr=0.8 cr, and now if it is 7% his approx book size has to be,14.54 cr,that particular branch has to increase book size by 50% to retain the same income,which im not sure is happening with the banks that have increased the rates.

Most of the corporates are tied up with banks for salary accounts either because of lending(in case of sbi) or hdfc(first mover advantage/providing atms at site),despite the higher interest rate it is difficult to dislodge the existing ones,sice the HR/ADMIn also dont want to take the difficult steps either due to fear or being comfortable with the existing player.

One should be wary,when a bank is aggressive especially when lending to SME sector.You would rarely find HDFC in the race for lending.I think they are into small ticket sizes with emphasis on retail lending.

(Soumya Kanta Panigrahi) #15

Yes bank is nearing Rs 500(currently 497). Should some % of shares be offloaded as the stock is trading 3.77 times itâs FY12 book value of Rs 130?

(Prabeesh) #16

The down play in the case of deccan holding is a major concern with respect to management. They have not yet called Deccan holding loan as NPA until recently.

I am afraid how they loaned to them in first place if the management compromises of such high quality people as they claim.

Please post your views on this topic.

(Vijay) #17

For a long term investor with a time frame of 7-10 years, I don’t think Deccan Holding NPA would affect the revenue, net profit and the size of Yes Bank seven years from now.

Any downside will be an opportunity to buy.

Hope it goes down! Though I think it will not dip unless there is a general dip in the bank nifty and other banking stocks.

(Vinod MS) #18


In a rising interest scenario wouldn’t YES bank’s retail thrust suffer as the difference b/w its s/b a/c rate (currently 7% as being marketed) and others would shrink?

Since the most talked about story in YES bank’s future growth is how it will increase its retail portfolio by aggressive pricing and thereby increasing CASA just get a feeling that strategy may not be effective going forward.

Your thoughts please


(Vijay) #19

1). The interest rates were higher a year back compared to now. Even, at that time, other banks did not offer more than 4% interest rates on savings accounts.

2). The 7% rate is only for accounts with AQB more than 1 lakh. For rest, it is 6%. Usually, it is difficult to maintain an AQB of more than 1 lakh in a savings account for a middle class guy. Therefore, majority of the accounts would be getting 6% interest rate only.

3). Once Yes Bank builds a large customer base, they would most likely reduce the interest rates. Initially, the bank may reduce it by 1%, i.e. 6% to AQB of more than 1 lakh, and 5% to others. And after some more time, the bank may bring it back to 4% increasing the NIMs substantially.

Once opened, not many customers close their savings bank accounts because of a difference of 1 or 2% interest rates. This is because of the linked demat, mutual funds, other accounts etc.

The current strategy is to attract customers who are looking to open a new bank account.



(Prabeesh) #20

**No i am not talking about the impending loss it might make.I am talking about the management stand on it and the way the lending process is done.Today it might get away with Deccan case with small loss, but if the process is not sound it will result in huge loss in future in some other case.

Hence would be great if management can come out with explanation what went wrong in this deal and what have been done for this case not be repeated in future