Banking stocks are a different ball game altogether. You can’t paint them with the same brush of looking costly and time for some profit booking.
What happens is now for YES is, it is at a favorable position now to dilute the book at significantly higher P/B preferably near 4 times price to book. This is extremely positive for the smaller investors.
Once a QIP etc. is being done at these prices, the bank will again have a higher book value leading to a fall in P/B. A much smoother leeway on the Capital Adequacy font, leading to pushing the triggers on aggressive growth.
Hence, this will add as a growth catalysts and fuel growth ahead (in business ) and rise ahead (in stock price).
Note that Rana Kapoor, had been delaying the book dilution until now and trying to augment the CAR with hybrid instruments over pure equity.
ICICI did something similar (diluting book at very high P/B) in the previous highs of 2007-08 bull market, however they were tormented by the poor asset quality and heavy portfolio on unsecured loans (credit cards) which wrecked havoc during 2008-09 and led heavily to crash in stock price.
So growth needs to based out on sound prudential business thinking and not purely for the sake of growth. Trust Rana Kapoor to handle matters prudently.
Net Int Inc up 36.7% to 584.32 Cr from 427.58 Cr.
Non Int Inc up 48.1% to 313.19 Cr from 211.43 Cr.
Net Profit up 34.7% to 342.31 Cr from 254.09 Cr.
Gross NPA up 5.8% to 76.24 Cr from 72.06 Cr (Sq 102.84 Cr)
Net NPA up 8% to 15.57 Cr from 14.41 Cr (Sq 20.13 Cr)
Note: Both Down sharply Q-o-Q
Gross NPA at 0.17% against 0.2%
Net NPA flat at 0.04%
Capital Adq Ratio at 18% against 16.13%
RoA @ 1.6% up from 1.5%
RoE @ 24.9% up from 23%
NIM at 3% against 2.8%
Deposits grew 20.2% to 56401 Cr
Advances grew 22.3% to 43857 Cr
CASA grew 75% to 10341 Cr with a CASA to Total Deposit of 18.3% v/s 12.6% year ago.
Book Value at 158.8 v/s 129.5
9M/Fy-13 v/s 9M/Fy-12:
Net Int Inc up 35.4% to 1580.67 Cr from 1167.4 Cr.
Non Int Inc up 48.6% to 878.05 Cr from 590.77 Cr.
Net Profit up 33.1% to 938.53 Cr from 705.19 Cr.
NIM to improve on rising CASA share, C/I ratio to be maintained below 40%
Yes Bank conducted concall on 16 January 2013 to discuss financial performance for the quarter ended December 2012 and the prospects of the bank. Rana Kapoor, Founder/Managing Director & CEO and Rajat Monga, Senior Group President, Financial Markets & CFO addressed the call**
Highlights:
**
Customer assets (loans and credit substitutes) grew 27% YoY and 3% QoQ to Rs.55754.2 crore in quarter ended December 2012. Advances grew 22% YoY and 4% QoQ to Rs.43856.8 crore at end December 2012.
Deposits grew 20% YoY and 8% QoQ to Rs.56400.5 crore in the quarter ended December 2012. CASA deposits grew 75% YoY to Rs.10340.8 crore, taking the CASA ratio to 18.3% as at end December 2012 up from 12.6% at end December 2011.
Retail Banking Liabilities (CASA + Retail banking term deposits) improved to 37.8% of Total Deposits at end December 2012 from 36.6% a quarter ago and 30.7% a year ago.
Retail banking liabilities (CASA + Branch Banking FD) are expected to increase to 55-60% over next two-years from current 37.8% at end December 2012.
NIM has improved to 3.0% in quarter under review against 2.9% in Q2FY2013 and 2.8% in Q3FY2012. NIM is expected improve further depending on favourable money market rates and liquidity conditions.
Rising CASA share in total deposits would mainly support improvement in NIM. During last one year, about 15-20 bps of improvement in NIM is expected to have contributed by 570 bps increased in CASA share to 18.3%.
For the seventeenth sequential quarter RoA has continued to be above 1.1%.
ROE at 25% was highest within the banking industry. ROE is expected to be maintained above 20%.
Non-interest income share increased to 35.7% in the nine months ended December 2012 from 34.7% in FY2012 and 33.3% in FY2011.
CRAR including profits stood at 18.52% with the Tier-I capital of 9.52%.
Bank headcount has increased by 1519 employees during last one year to touch 6532 employees at end December 2012. About 4500 employees are working in retail sales and operations.
Asset quality has improved sharply during the quarter under review. %GNPA declined to 0.17% against 0.24% a quarter ago and 0.20% a year ago. With higher provisions, %NNPA improved to 0.04% at end December 2012 against 0.05% a quarter ago.
The provision has been raised up to 80% of exposure toward the non-performing account of Deccan Chronicle. Bank expects about 15-20% of recovery over next two quarters.
Saving account acquisition has witnessed the growth of 5-10% on QoQ basing during the quarter ended December 2012.
Cost-to-income ratio has improved sharply during Q3FY2013, while bank proposes to maintain cost-to-income ratio below 40%.
Bank is targeting Retail+SME lending book to rise to 30%, CASA to improve to 30% and NIM to increase to 3.5% over next three years.
Bank also targets to set up 750 branches and 2000 ATMs.
Bank has received 146 new branch licenses, so far, from the RBI for Tier-I locations.
On P&L
Net Interest Income up 42.4% to 638.12 Cr from 448.23 Cr.
Non Interest Income up 42.4% to 379.38 Cr from 266.35 Cr.
Operating Profit up 47.3% to 633.88 Cr from 430.36 Cr.
Net Profit up 33.2% to 362.15 Cr from 271.8 Cr.
Note:
Provisions jumped sharply to 97.53 Cr from 56.68 Q-on-Q due to which
Provision coverage increased to 92.6% v/s 79.6%.
On Balance Sheet:
Deposits grew 36.2% to 66956 Cr from 49152 Cr
Advances grew 23.7% to 47000 Cr from 37989 Cr
Where Credit to Deposit ratio fell to 70.2% from about 77%.
CASA grew 71.6% to 12688 Cr from 7392 Cr - taking CASA ratio to 19% v/s 15% Y-o-Y.
On Key Ratios:
RoA @ 1.6% v/s 1.5%
RoE @ 25.2% v/s 23.6% NIM @ 3% v/s 2.8%
CAR @ 18.3% v/s 17.9%
Cost to Income ratio down to 37.7% v/s 39.8%.
On Asset Quality:
Gross NPA up 12.5% to 94.3 Cr from 83.9 Cr (76.2 Cr previous Q)
Net NPA up 300% to 69.9 Cr from 17.5 Cr (15.6 Cr Previous Q)
Gross NPA at 0.2% against 0.22%
Net NPA at 0.01% against 0.05%
The bank is getting into other financial activities like Broking Etc.
Fy-13 v/s Fy-12:
Net Interest Income up 37.3% to 2218.8 Cr from 1615.6 Cr.
Non Interest Income up 46.7% to 1257.4 Cr from 857.1 Cr.
Net Profit up 33.1% to 1300.7 Cr from 977 Cr.
Reported Full Year EPS 35.55 v/s 27.13
Latest Book Value @ Rs. 161.9 (132.5 Fy-12)
On 17/04/2013, stock on BSE Closed at Rs. 480/- (up 2.2%)
So there is a board meeting today to discuss the issue of appointing daughter of former director cum promoter. There is also a Case filed with july 1 as hearing any more idea on this and how this affects the bank?
Yes bank is the most affected private bank due to the recent RBI measures as it is highly dependent on Short-term wholesale funds. And the the outcome is quite visible to us as market has punished it by 10% in a single day. Since it has not raised any funds recently and also the capital adequacy ratio was not exceptional at the end of FY13, it might face some hurdles in maintaining the pace of the 30% growth. NIM’s will be impacted significantly as the cost of funds will be increased and any cut in interest rates cannot be passed on to its customers due to margin pressures which will ultimately lead to loss of some Business to others. Please chip in with your inputs to understand this better.
Seniors,
Do you see this as an opportunity to accumulate this growing company at these wonderful price. ?? Is it wise to wait and watch for a quarter or two ?
All these short-term issues are mostly seems to be priced in at the CMP as the script is available at less than 10FY14e PE. Also it has got all the nods required to raise 2000cr through QIP or GDR to fund their expansion plans.
Better watch the short term funds yields before taking any call. Long term yields have shot up to 8.25% from 7.35% a month ago and the call money rates are at 9.25%.
After last two days' slide in stock, Yes Bank is sending e-mails to shareholders
Dear Valued Shareholder,
Leading Brokerage firms Morgan Stanley and Goldman Sachs have recently released reports and included Yes Bank on their Conviction Lists of top stock recommendations. Both Goldman Sachs and Morgan Stanley looked at YES BANK as strong long term bets based on operating fundamentals. Despite the recent correction in the stock, leading brokerage houses have maintained their positive outlook on the stock with a strong expected growth outlook in Earnings and Profits. Further, recently RBI has taken measures to stabilize Rupee, by tightening liquidity and increasing short term money market rates. In this environment, given the below mentioned factors, the Bank is well placed to continue its overall business and financial performance.
Diversity of deposits has improved significantly over the past 3 years on the back of retail deposit and CASA traction, CASA as at March 31, 2013 at 18.9%
More than 86% of deposits are from depositors contributing less than 0.20% of total deposit base individually
Yes Bank has limited concentration in deposit base
Yes Bank runs a positive interest rate gap in the short term (less than 6 months) bucket, hence with the current tightness in liquidity, increase in rates may have beneficial impact on margins.
In addition, please find below a table with recommendations by leading brokerage houses that have recently released update reports on Yes Bank and have re-iterated their Positive views on the Bank.
Some of the key highlights of the Goldman Sachs and Morgan Stanley reports are as follows:
Goldman Sachs
Goldman Sachs has a BUY rating on Yes Bank and as per report released on July 2, 2013 it has increased the Target Price on Yes Bank from Rs. 620 to Rs. 650. Goldman Sachs has adopted a new model for valuation and has revalued YES BANK upwards which values stock both on current book and long term earning potential
Yes Bank is the Top Buy recommendation in India in Financials and the only banking stock from India to feature in their Asia Conviction List. The Asia Conviction list has only 7 stocks from Australia, China, HK, India, Indonesia, Japan, Malayasia, Singapore, Taiwan and Thailand out of 90 stocks under coverage; YES Bank features as one of the 7 select stocks with strong potential upside.
The investment thesis is basis strong traction in CASA ratio and strong RoEs of over 25%
Morgan Stanley
Yes Bank has recently been included in the top 15 of High Conviction Quality Stocks covered under the MS coverage universe out of a total MS coverage of approximately 135 stocks across various sectors on the basis of high quality management and consistent performance
Being a part of this list is the reflection of high performance in the form of high ROE, net margins, sales, EPS and dividend growth while keeping a low variability of these fundamental factors. High quality is also about high returns, albeit with low beta, stable investor bases (thus low share turnover) and low financial risk.
Out of the 15 stocks on this list, Yes Bank has delivered the highest 5 year trailing growth in EPS at 60% CAGR
As per the MS report, Yes Bank is one of the Top 20 FII favorite stocks over the past 5 years. During that time, the FII ownership in Yes Bank has increased by 18.1% with a 5 year trailing return of 328%. Morgan Stanley has a BUY recommendation on the Bank with a Target Price of Rs. 670
Summary of reports from other leading Research houses:
No.
Research house
Recommendation
Target Price (Rs.)
Commentary
1
JM Financial Institutional Securities
Maintain Buy
700
*Focus on strengthening its retail banking franchise with focus on retail liabilities.
*Best in class asset quality with the lowest gross NPLs, restructured book and credit costs in the banking sector.
*We forecast 24% earnings growth over FY13â15E and expect the bank to deliver superior return ratios with ROA of 1.5% and ROE of 19%
2
Merrill Lynch
Maintain Buy
625
*While the promoter case is subjudice, we believe that impact on business may be ânilâ
*We reiterate our Buy rating and believe that there is an opportunity to buy into any correction.
*We believe bank is on track to deliver +25% EPS growth in FY14/15 (tweak-up FY15 EPS by <2%), even in challenging macro environment.
*RoEs to remain above avg., at ~25%, and, hence, we retain our Buy rating and PO of Rs625, for upside potential of 30%.
3
HSBC
Maintain OW
612
*We understand that investors would like to see a quick resolution of Promter Issues and switch focus back to fundamental issues.
*This year is likely to see greater attention on rollout of their retail strategy.
*Retail mix is likely to defocus from buying pools and instead focus on CVs, cars, gold and micro SMEs for growth.
*As a result of the retail-led strategy on both sides of the balance sheet, margins are targeted to improve 15-20bps this and next year.
4
Macquarie
Outperform
600
*Though there could be near term sentiment impact on the stock, we donât see fundamentals of the company getting affected in anyway and maintain our Outperform rating on the stock and reiterate YES Bank as one of our top picks in the sector.
5
Deutsche
Maintain Buy
590
*The recent issue concerning the family of one of the promoters seems to be some sort of a family issue, with no impact on the business.
*We do not have any particular view on this and would like to highlight that the business is unlikely to be affected and that there should be no drop in board level standards.
*The recent correction makes valuations even more attractive
Thanks & Regards, Financial & Investor Strategy, YES BANK Limited
Yes, the stock price focused mail is surprising given the pedigree of the management. Case of bad corporate communication? I’m inclined to give them the benefit of doubt and am accumulating it from a trading point of view. Lets see how it goes.
The work of the management is to focus on the business and not on the share price. Share prices will follow good results.
I think this kind of focus of management on the stock price speaks of something bad. ‘Pecking Order Theory’ anyone !!
I think the stock price will surge for a few sessions, (ofcourse with the help of a few operators). But I would want to buy Put Options of August/September Series.
Agree that sending a mail to shareholders is a bad move. They could have outlined what they plan to do in terms improving the liability franchise, ability to pass on costs etc.
Yes Bank is planning to raise capital and there were reports that they would do it at Rs 500+ levels. So they are probably worried about that.
I have not received any such mail. But this is certainly not a good sign from the management. Despite of all these things, the bank is slated to grow at minimum 25% CAGR for the next few years and is available at throw away 9.5XFY14 ePE. These shortterm glitches has thrown very good oppurtunity for us to accumulate.
disclosure: will accumulate till 415 levels with stoploss below 400rs.
Yes bank has always targeted to raise money when P/B is > 3 , they did not raised it last year, now they are in desperate need of money … and suddenly they see stock is down by 15%.
But in any way this not the way to keep price afloat.
yes bank had refused to acknowledge loan to DCHL as NPA - a negative sign. Resignation of company secretary - it could be due to some other reason but it does raises eyebrow when company secretary resigns. And now this letter. Also the effect of RBI tightening liquidity on yes bank is not known. From different news it appears due to tough economic conditions, NPA of finance institutions is expected to rise. In such a scenario these kind of negative news does not augur well for a finance institution.
All those above mentioned negatives/drawbacks were present even last month where the price was around 500. No new developments have happened in the last month except for the sectoral headwinds. I would say that all these points will be highlighted only when some event like this turns out unexpectedly.
We are getting a potential 25% CAGR company in a growing sector in a struggling economy with huge moat and with a credible pedigree at death cheap valuations of 9 times ttm.
Seems like a blind steal for me.
What i wonder at this juncture is how do these REPCO and GRUH holding their prices very strong despite the gloomy outlook on the entire sector. No wonder market is very strange and highly difficult to understand.
I think the valuation of Repco and Gruh is high compared to Yes Bank, because of the target segment to whom they lend and the collateral that they have for these loans. The target segment for Repco and Gruh are individuals with no negotiation power (can’t switch to any other lender)and their homes in which they live is collateral. This gives an upper hand to thelending agency, and it can raise the rates according to the rising costs. To the contrary, Yes Bank lends mostly to the corporate, who has huge negotiation power, can switch the lending agency at will and generally provide no or meaningless collateral. This means that in bad times, yes bank’s profitability can dip sharply. While Repco and Gruh can continue to show stellar performance even in the bad times.
I agree that Repco and Gruh are at higher valuations due to target segment - home loans in semi-urban areas where the competition is less and also due to better returns ( ROA). However, i feel that Repco being promoted by state govt is no longer undervalued at these prices. But it can still give good returns if it can continue with its past performance.
YES Bank - i also think that now Yes bank is at dirt cheap valuations. My question is** WHY** WHY it is available at these valuations when other banks like Indusind are at much higher valuations. Yes Bank has a strong track record and a consistent one and reported 38 % jump in profits for june qtr but still WHY the stock fell so badly. Makes me think there is something which we dont know.
