Yes Bank reported a strong performance during the quarter with a PAT of Rs 540 crs (up 30.0% Y-o-Y & 12.0% Q-o-Q).
Net interest income grew strongly 36.6% Y-o-Y & 6.1% Q-o-Q on the back of a** strong loan book growth of 32.4% Y-o-Y** and stable NIMs sequentially
Following suite, non-interest has showed strong growth momentum up 38.4% Y-o-Y and 6.2% Q-o-Q on the back of third party distribution (+64.9% y/y), income from financial markets (+41.3% y/y) and financial advisory fees (42.8% y/y)
Operating expenses increased 32.9% Y-o-Y on the back of branch expansion
Provisions stood at Rs 70 crs in Q3FY15, a decline of 41.5% Q-o-Q
Asset quality has deteriorated during the quarter with 25.3% sequential increase in gross NPAs. Gross NPAs and Net NPAs stood at 0.4% & 0.1% respectively with PCR of 76.8% (up 108bps Q/Q)
6) Loan book grew 32.4% Y-o-Y & 7.4% Q-o-Q driven by a strong retail loan book (up 17.5% Q/Q) as wholesale lending softened
Deposits growth came at 21.0% Y-o-Y & 2.8% Q-o-Q, CASA ratio showed uptick 13bps Q-o-Q led by a healthy trajectory in saving deposits (up 42.8% Y-o-Y).
Bolded part is quite impressive. The book value should now be about 280-285 , current P/BV is around 2.87. Is available at 50%+ discount to other high RoE private Banks likeHDFC Bank , IndusInd Bank.
Bank sees leading indicators showing signs of improving economic outlook. Bank expects 1% higher GDP growth for FY2016 compared with GDP growth in FY2015.As per the bank, healthy growth in interest as well as non-interest income boosted the overall performance of the bank in Q3FY2015.
Bank has maintained the NIM at 3.2% on sequential basis, which was pressured by efforts to achieve regulatory compliance with liquidity coverage ratio (LCR).Bank has stepped up government securities investment to 6% above SLR ratio to comply with LCR ratio. Bank is also closer to fully comply with the LCR.
Fresh slippages of advances to the NPA category stood at Rs 67 crore in Q3FY2015. Meanwhile, bank has restructured one account in Q3FY2015.Bank has not conducted any sales of assets to Asset Reconstruction Companies (ARCs) in Q3FY2015.Bank has made provision of Rs 55 crore of NPAs in Q3FY2015.
Bank has recorded MTM gains of Rs 10-15 crore for Q3FY2015. However, the losses on the swaps negate the gains on the g-sec book for the bank and vice versa. Bank has also preserved the gains in the SLR portfolio eyeing further appreciation.
The duration of the credit substitute book was 2.5 years, while that of SLR-AFS book stood at 1-year.The yield on credit substitute’s book stood at 10.75%.
Average cost of saving deposits was 7-7.5% at end December 2014.Bank is holding excess provisions amounting to about 50 basis points to the loan book.
Rana Kapoor, MD & CEO, Rajat Monga, Senior Group President, Financial Markets & CFO addressed the call:
Highlights by Capital Mkt:
Bank has significantly achieved the goals of five-year ended March 2015 growth strategy eVersion 2.0f planned in 2010. Bank has been recognized as largest mid-sized bank, as targeted under Version 2.0 growth strategy.Bank now aims to become a large bank under next phase of growth strategy called as eAction+Quality= Growthf. Bank plans the new phase of growth strategy to be more focused on qualitative targets.Bank proposes to improve the CASA ratio to35-40%, maintain loan growth in the range of 20-30%, and expand branch network at the rate of 15-20% every year. Bank is targeting 50:50 balance between Retail-Corporate loan segments in next 4]5 years.
Bank has taken board approval for capital raising of US$ 1 billion though ADR or GDR or QIP.Bank has also taken board approval to setup offshore office in GIFT (Gujarat). This would raise the foreign borrowing capacity of the bank.
Bank is confident about higher economic growth in the second half of FY2015. As per the bank, the recent developments such coal and telecom spectrum auctions, clearance to Mines and Minerals bills would help in addressing many legacy issues.
Bank expects 50-75 bps of report rate cut from the Reserve Bank of India (RBI) in FY16.Banks internal lead indicators are indicating at macroeconomic environment; as the upgrades have been higher than downgrades in the internal ranking system in last two-three quarters.Bank expects to maintain strong loan growth in FY16, while expects the loan growth (%) to be in the range of low to mid 20fs.Bank continues to maintain control on asset quality for 28 straight quarters.
The restructured advance book of the bank increased to Rs 382 crore in Q4FY2015. One account from the road sector, due to delay in date of commercial operation, mainly contributed to the increase in restructured advance book.Bank has exposure to the road sector at 1.3% of the advances, while exposure to the power sector stood at 1.2% that is mostly renewables.Exposure in the steel sector stands at 3.3%, of which about two-third is higher rate.
Bank has provisions worth Rs 126 crore in Q4FY2015, which consisted of Rs 47 crore of general provisions, Rs 12.6 crore of NPA provisions, Rs 51 crore of floating provisions and Rs 16 crore of provisions for unhedged foreign currency exposure of client and other regulatory provisions.
Provisions stood at Rs 340 crore for FY2015, which consisted of NPA provisions of Rs 130 crore, floating provisions of Rs 105 crore, General provisions of Rs 98 crore and other provisions of Rs 50 crore.Floating provisions stood at 0.5% of advances, while banks propose to improve floating provisions to 1% of advances.Bank expects the credit cost at 50-60 bps for FY2016, similar to that of FY2015.The fresh slippages of advances stood at Rs 387 crore for FY2015, while recoveries were Rs 200 crore and write-offs were Rs 53 crore.
Capital raised in Q1FY5 contributed to the NIM improvement by 25 bps, while the regulatory compliance to liquidity coverage ratio eaten away NIMs of 15 bps.As per the bank, the upward revision in the saving account buckets for would help in reducing the cost of funds by 20-25 bps.Yields on credit substitutes stood at 10% excluding RIDF investments.Bank expects RoEs to improve shortly to 20fs.
Its interest rate for savings account is 7% (for deposits of over 3 lacs, and 6% for <3lac deposits). Will give the likes of icici, hdfc, axis bank a hard time in future i suppose.
Branch network is ever expanding and the bank is advertising well (through IPL etc).
If CASA expands to 35-40%, it will call for a re-rating. The bank also plans to raise US $1 billion through ADR in March 2016. (last year, it had raised 3000 Cr.) with 12% equity dilution as per Rana Kapoor. (That will mean the ADR will list at 1150-1200/- per share? and will result in book value of around 500/- per share in 2 years)
The bank is known for its aggressive lending and UBS report has nailed it finally. Many in the industry know it but could not discuss bcz of its super ‘clean’ reporting. This will still keep reporting clean nos for some more time after raising capital.
Highly exaggerated report and should be treated as trash. Exposure to stressed cos. has been estimated to be more than twice the actual exposure as per the management - www.youtube.com/watch?v=ehpRixrpTLc
UBS to me is a fraud company which comes up with such reports to make the most money (for ex. may have shorted YB before the report was out and may go long on YB soon). I have seen the temporary effect that UBS ‘reports’ have on other stocks too.
How come this company continues to report clean numbers for past 7-8 years? NPAs should have appeared at some point in time. It is one thing to show clean numbers for 2-3 years and then show huge NPAs later. But that has never happened. Their numbers are consistently better than even HDFC bank.
Its time that names of panic/volatility creates like UBS are brought out to everyones notice by SEBI.
From management’s interview yesterday-
"I do want to highlight the risk of generalisation for investors as well as for other stake holders that please do not generalise one bank exposure across any group; do not generalise one bank exposure in the same group’s another bank’s exposure in that group.
It is not going to be a safe conclusion without knowing what banking merit has been put behind that, which the report naturally does not always dwell into. That is the key point, which is that does not conclude without having a good assessment of the actual risk.
Latha: What in your assessment could be the amount of restructured assets or refinanced assets. What will be your total of NPL plus restructured plus refinanced at the end of the June quarter and at the end of the September quarter. How much higher will it be vis-à-vis Q4?
A: Let me be a bit cautious about the fact that we are already in the result period. The gross NPA is 42 bps, net NPA will be 12 bps – these are March numbers. We have about 49 bps of restructured loans. I have not mentioned that we have about 50 bps of excess provisioning, you can call it counter cyclical provisioning.
Our NPAs are minus 38 bps if I factor the excess provisioning because that’s there in the balance sheet. It has been set aside, but is not been used to present the NPA on net basis. It is a pretty good book in my view.
We have given credit cost guidance of 60-80 bps for the year and that’s something that this report doesn’t change at all. In fact, I would want to hazard that the credit cost situation is slowly improving as the economy is also looking to do better, some de-risking is happening.
All those things are also generally stacking up in the background of the economy. NPAs and restructured assets usually will go up. We also had 60-80 bps NPA guidance last year, but our gross NPA is only 42 bps because we are also absorbing the NPAs into theprofit and loss (P&L). So, the gross NPAs do not aggregate. I do not think we are worrying about the NPA situation worsening from here."
UBS has surveyed exposure of 100 companies constituting around 15% of corporate loan book and found that nearly 60 per cent of the companies have a debt to equity ratio of greater than five. Around 10 per cent of these companies have a debt to equity ratio of less than 2, the level which is considered prudent. Furthermore, around 50 per cent of these companies have cash interest coverage of less than one, implying that they are not even generating enough to service the debt.
Loan approval list exposes the banks:
Yes Bank has the highest credit exposure to these companies at 8.9 per cent followed by PNB at 8.2 per cent and ICICI at 5.5 per cent. For Yes Bank, these exposures accounts for 19 per cent of loans while they are 14 per cent for ICICI and 10 per cent for PNB. Yes Bank has contested these numbers."
Now, average exposure to these 100 companies for the banking system as per the ‘report’ is 15%. For yes bank, it says the exposure is 19% of the loan book. Yes bank management comes out and tells it is less than even half the number reported. That means less than (19/2=) 9.5% which is far less than the mentioned average exposure (15%) for the banking system. So, atleast in Yes Bank’s case, the report seems to have exaggerated and created unnecessary panic.
Not that interested in number crunching since I moved on from the story long back. Forget the nos, I found Rajat Monga’s interview a revealing one. He clearly seemed to be in defensive mode and I felt as if YB has been caught red-handed. I didn’t find him convincing enough. There is no point fighting about the nos. since “none” except may be RBI can verify the same. These percentages are very fluid and vary as per the definition of the bank.
True… there are concerns like unsecured loans to corportates . low casa etc … their asset quality is not as great as hdfc bank . but, better than a lot other banks … we had a similar report during mid 2010 nad all hell broke lose and the stock crashed from 340 to 220 … i believe YES as a business will do pretty well as of now …am taking that report with a pinch of salt …
Somehow, all this back pedalling by various research houses on exposure etc has robbed the sheen off this superbly performing bank. The growth numbers are above ind average and the slow decrease in cost of money is commendable. Stock is struck in this 780-880 range forever and just slides or rises based on news or no news respectively. Add the pot boiler between kapoors, you have no shortage of dubious news!,
Disc. Invested. Views will be biased. Do your own research. This isn’t a buy/ sell reco
Yes, the company has done fantastic both on topline (42%) and bottomline (27%). What surprised me is the reduction in gross npa guidance from 60 - 80 basis point to 50 - 70 basis point after Q1 results.
