After fall in banks index, I started looking at Yes Bank. For last 10 years, there is a constant equity dilution by the company. Some of it may be employee stock plans but not all of it looks so.
I don’t like companies that do equity dilution so often at all.
Disc - Not invested
Hello Rupesh,
Banks/NBFC Regularly do equity dilution based on the funds/Capital requirements and cost of capital.
I don’t see any reg flag in this!!
DISC: Not Invested
key to looking at dilution is how much growth is achieved in per share value. Book Value , EPS and div per share
roe will also anull dilution effect for you while analyzing comp.
major point to note about yes bank and other private sector bank likes of indus ind is that equity raising happens at price to book of 2 or more so it enhances book value
Smashing results again. 675cr Pat vs 610cr qoq, yes …quarter on quarter.
Net NPA 0.22% vs 0.2%qoq.
Probably the cheapest growth stock out there.
Disc-: invested.
If there’s one Stock that warrants a rerating, then it is YB. This is an HDFC bank of future.
(Views maybe biased as I hold)
So it makes 675cr profit in a quarter and the market keeps ignoring. What is the basis of this re-rating? You need to ask does Mr. market know something that you don’t?
Would suggest you to plot PEs of YB and HDFC since IPO. You might find that it used to trade at premium to HDFC Bank in initial days. It has been de-rated and might be trading in line with ICICI or Axis now. One crisis in 2008 taught many that it is not that hunky dory here. I feel that Mr. Market is waiting for another crisis which will confirm many rumours and bring down valuations in line with DCB! I have strong feeling that it is another ICICI in the making with bloated assets having substantial skeletons disclosed after getting slap on the wrist.
Disc: No Holding
If the market is treating any bank like the future HDFC, then it is Indusind - has become a 100 bagger in the last 14 years.
And it compares favorably on all parameters such as growth, RoE, NPA, etc. (Although haven’t studied its numbers in too much detail)
Sumit, everyone is entitled to have an opinion but your point abt 2008 crisis is incorrect.
There’s already a lot of stress in commodites, discom sectors but YB is managing well still.
Go through the thread in case you haven’t, mentioning points of loans to higher rated cos. Backed by good collaterals, growing retail lending, growing deposit base, growing casa %age, growing NIMs to get the overall picture.
I dont think one can have better people running a bank than Rana Kapoor or Rajat Monga.
Well, facts are facts you can’t say valuation is cheap and the market is very bullish at the same time. I had enough arguments on this thread. Don’t have anything new to add but the stock has got cheaper since then. It is a quality organisation built over the decade but…This stock will rally 50% the day RK is kicked out from YB. BTW I made 7 bagger in YB and sold in 2011 so I have been tracking it closely for long time now.
Yep, facts are facts. Markets will wake up to the facts is my evaluation. Maybe yesterday is a start.
Since you are tracking it from a long time, I hope you are tracking the improvement in parameters mentioned in my last post.
Cheers.
BTW, even the last qip in 2014 was oversubscribed 5 times,meaning for $500mn, investors made total $2.5 bn offer, at 3 times trailing book value.
(After q3 fy16, book value is 326/- btw plus parameters of casa, retail lending percentage are vastly improved.)
Disc: I am a Yes Bank shareholder for the last seven years.
I am taking a risk, and I know that this is not HDFC. Still a largely wholesale bank.
If one plots provisions vs advances with a three year lag (today’s provisions to 2012 advances), we will see why Yes Bank is not HDFC Bank. You can still get identical x% annualized returns from two companies in a 5 year period even if their return metrics like RoE and RoA are y and 2y respectively, if the starting valuations are different. But if you are taking a 20 year period, it will be significantly different.
Remember 2008 crisis proved that retail banking was lousy with credit card and personal loans.
ICICI went down then. Then came the wholesale bubble and HDFC Bank started giving out credit cards. Now, everyone is talking corporate loan NPAs and ICICI is going down now as well.
In a nutshell, HDFC Bank knows what it is doing (a value investor). ICICI Bank is plain dumb and a follower (just like an average retail investor). Yes Bank is somewhere in between (lets say a MF).
Few points :
YB’s deposit base and advances are growing at higher rate due to the smaller base. So if one is plotting provisions vs advances for comparison, the lag period for advances for YB should be less than what one is taking for hdfc. So if you’re taking 3 yrs lag for advances for hdfc bank, u should take maybe a 2 yr lag for YB.
long term RoE for YB(21.6%) is greater than that of hdfc bank (18.x%). (Courtesy screener.in)
NIMs and retail lending as a percentage of total is showing great trends of improvement for YB
Well, I remember at one point of time there were more than 50 analysts covering YB so the nos. you are giving out is not only known, dissected but digested by the market as well. Sounds funny but someone told me that one can do simple linear extrapolation with surprise element as addition factor to find next quarterly nos. of YB.
The linear extrapolation for PAT is equally or more valid for ajanta Pharma as well as for HDFC. The (negative) ‘surprise’ part you r looking for is becoming less and less likely with the set of improving parameters. As an investor, I am sure people will feel more and more secure while holding YB in the light of improving parameters.
Best of luck on this 
Attaching an extract from YBs Investor Presentation on asset quality-
Update on NPA and Restructured Advances-
Gross NPA at 0.66% (5,586 mn); Net NPA at 0.22% (1,872
mn)
Specific provision coverage ratio of 66.5%
Total Standard Restructured Advances stand at ` 5,683 million
as at Dec 31, 2015. This represents 0.67% of Gross Advances
During the quarter, the Bank has not done any restructuring.
Further, there were no slippages from the restructured book
into NPA, during the current fiscal
There has been no sale to ARC during the last five quarters.
The Bank has not refinanced any loan through 5-25 route and
has not participated in any SDR since the introduction of these
schemes
Bank continues to show resilience on all Asset Quality parameters
Trend
All this Sounds super good!!!
This is also a big compliment on the RIGOROUS LOAN DISBURSING SYSTEM that the bank follows.
No, that’s why I want it to be compared with the same time lag.
Yes (Year 0) cannot be subsidized by Yes (Year 2/3)'s advances, especially when a good part of Year 2/3 is funded by new capital. Advances growing faster can hide the NPA problem. What I am saying compare a year’s advances and see how much is in bad state after three years. That gives the ability to assess loan quality by the bank on level playing ground.
Else, you will always have a bank growing on new capital, writing new loans and effectively asking everyone to forget its past loans quality issue. Looks like I am talking about ICICI from 2004-07 / 2010-12 
@ Piggyway… Ur argument is compelling…its bringing out the detail which is really informative.
But I have question. Should there be pressure on asset quality, will it not show up somewhere?
At least in restructured loans?? Also the absolute value of GNPA in terms of crores of rupees is pretty paltry wrt NP.
All this should be a source of comfort. Isn’t it??
Please correct me if I am wrong.
