Result Update
January 15, 2015
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Buy
| 890
12 months
10%
Yes Bank (YESBAN)
|810
Strong performance, likely to continue…
• Profit grew 30% YoY to | 540 crore vs. our estimate of | 547 crore
led by stronger-than-expected NII growth of 36% YoY to | 908 crore
Target
Changed from | 797 to | 890
• Asset quality disappointed with GNPA increasing to 0.42%, up from |
EPS FY15E
Unchanged
222 crore to | 278 crore QoQ. NNPA rose to | 65 crore vs. | 54 crore
EPS FY16E
Changed from | 61.9 to | 63
•
Credit
and deposits grew higher than estimates at 32% YoY (| 66606
Rating
Changed from Hold to Buy
crore) and 23% YoY (| 82370 crore), respectively. As a result, NII
surged 36% YoY to | 908 crore vs. | 882 crore expected. Building the
Quarterly Performance
liquidity coverage ratio under Basel III led to margins remaining
| Crore
Q3FY15 Q3FY14 YoY Gr.(%) Q2FY15 QoQ Gr.(%)
stable at 3.2% in spite of cost of funds being 20 bps lower
NII
908.4
665.5
36.5
856.4
6.1
• Other income grew 38% YoY to | 537 crore vs. | 566 crore estimated
NIM (%)
3.2
2.9
30bps
3.2
0bps
as treasury gain was lower than expected at | 99.6 crore. Retail fees
PPP
862.1
614.7
40.3
817.1
5.5
improved QoQ to | 72.9 crore vs. | 58.3 crore, due to higher growth
PAT
539.7
415.6
29.9
482.5
11.8
and retail sales
Key Financials
Version 2.0 to fall short of target, credit to grow at healthy 19% CAGR
| Crore
FY14
FY15E
FY16E
FY17E Version 2.0 aims to achieve 750 branches, 3000 ATMs, | 1.25 trillion
NII
2716.3
3405.0
4317.3
5579.0
deposit, | 1 trillion credit, 30% retail/SME credit and 30% CASA ratio by
PPP
2688.0
3392.6
4181.9
5287.4
FY15E. Largely, it aims to strengthen the retail presence on both the
PAT
1617.8
2000.8
2617.9
3374.0
ABV (|)
196.8
280.3
332.7
413.0 deposit (low cost CASA to reduce CoF) and credit (retail is high yielding)
front. The bank is likely to fall short of its target by 15-20% in majority of
the parameters. Historically, credit has grown at a brisk pace of 53.9%
Valuation summary
CAGR in FY08-11 to | 34364 crore while over FY11-14 growth has been
FY14
FY15E
FY16E
FY17E
modest at 16.8% CAGR to | 54755 crore. Credit is expected to grow at
P/E
18.1
16.8
12.8
10.0
22% CAGR to | 82876 crore to support 22% NII CAGR over FY14-16E.
Target P/E
19.8
18.5
14.1
10.9
P/ABV
4.1
2.9
2.4
2.0
Though wholesale funded business – NIM well managed at 2.8-3.0%
Target P/ABV
4.5
3.2
2.7
2.1
On the liability side of the balance sheet, around 58% (~| 44000 crore) of
RoA
1.6
1.7
1.8
2.0
Yes Bank’s deposits is wholesale funded that is highly sensitive to interest
RoE
25.0
21.2
20.4
21.6
rate unlike steady retail deposits. However, with gradual CASA build to
23%, the bank has consistently managed its NIM. On declining interest
Stock data
rates, we factor 15 bps NIM surge in both FY15E and FY16E each to 3.3%.
Particular
Amount
Market Capitalisation
| 34100 crore Superior asset quality to be maintained
GNPA (Q3 FY15)
| 278 crore On the asset side, the bank has ~85% exposure towards corporates,
| 65 crore which poses concentration risk. Large corporate (sales above | 1000
NNPA (Q3 FY15)
NIM (Q3 FY15)
3.20%
crore) constitute 68% while mid-corporate, SME & retail combined is
52 week H/L
804/292
31.3%. Despite having major exposure to corporate, asset quality is
Equity capital
| 416 Crore
stable with GNPA of | 278 crore (0.42% of credit), NNPA of | 65 crore
Face value
| 10
DII Holding (%)
19.7 (0.09% of credit) and restructured assets of | 170 crore vs. | 116 crore in
FII Holding (%)
46.3 Q2. We raise GNPA to | 418 crore and NNPA to | 85 crore by FY16E.
Profitability, return ratios to stay robust
Price performance (%)
The profit of Yes Bank has grown at a strong pace of 39.5% CAGR from
Return %
1M
3M
6M
12M
| 305.7 crore in FY09 to | 1617.8 crore in FY14. Going ahead, we expect
Yes Bank
11.9
33.5
53.1
130.8
PAT to grow at 27% CAGR to | 2617 crore over FY14-16E as we raise
4.4
30.4
38.9
112.9
Axis Bank
Indusind Bank
6.0
30.0
53.9
99.8 credit growth to 24% vs. 22% CAGR with NIM improvement to 3.3% by
FY16E. We introduce FY17E with PAT expected at | 3374 crore, loan book
of | 10500 crore and calculated NIM at ~3.5%.
Research Analyst
Continued performance may result in re-rating; maintain BUY, raise TP
Kajal Gandhi
kajal.gandhi@icicisecurities.com
In the past five years, the bank has consistently delivered 1.5%+ RoA and
Vasant Lohiya
20%+ RoE, which is estimated to be maintained during FY14-16E. We
vasant.lohiya@icicisecurities.com
raise our PAT CAGR expectation over FY14-16E from 26% to 27% and
Sheetal Ashar
29% for FY17E, increasing our credit growth and margin estimates.
sheetal.ashar@icicisecurities.com
Rolling over to FY17E, valuing at 2.1x FY17E ABV, we raise our target
price to | 890 from | 797 earlier. We maintain BUY rating on the stock.
What’s Changed?
ICICI Securities Ltd | Retail Equity Research
Variance analysis
Q3FY15 Q3FY15E Q3FY14 YoY (%) Q2FY15 QoQ (%)
NII
908
882
665
NIM (%)
3.2
0.0
Other Income
537
Net Total Income
Staff cost
Other Operating Expenses
PPP
Provision
PBT
Tax Outgo
PAT
36.5
Comments
Strong credit growth of 32% YoY leads to NII surge of 36% YoY but NIM remains
stable QoQ at 3.2%
NIM stable at 3.2% in spite of cost of funds declining 20 bps QoQ due to higher
borrowed funds to fund credit
856
6.1
2.9 30 bps
3.2
0 bps
566
388
38.4
506
6.2
Retail fee income, rather than treasury reported strong other income growth
1,445
254
329
1,449
245
326
1,053
194
245
37.2
30.9
34.5
1,362
239
306
6.1
6.3
7.6
Increasing retail presence via branches adding to cost
862
69.9
792
252.6
539.7
878
95.6
782
234.7
547.6
615
13.3
601
185.8
415.6
40.3
425.7
31.7
35.9
29.9
817
119.5
698
215.1
482.5
5.5
-41.5
13.6
17.4
11.8
278.7
64.5
232.4
55.0
195.8
42.3
42.3
52.5
222.4
53.9
25.3
19.7
170
130
107
58.6
116
46.2
Old
4,063.2
4,043.6
3.2
2,571.5
332.1
FY16E
New % Change
4,317.3
6
4,181.9
3.4
3.3
12 bps
2,617.9
2
332.7
0
Despite higher NPA, provisions declined QoQ
Key Metrics
GNPA
NNPA
Total Restructured assets
Slippages continued at | 67 crore vs. | 151 crore previously. Overall asset quality
remained under pressure with 25% surge in GNPA, though miniscule
Restructured assets increased sharply to | 170 crore from | 116 crore raising
pressure on NPA. Addition has come from a single account
[
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore)
Net Interest Income
Pre Provision Profit
NIM (%)
PAT
ABV (|)
Old
3,324
3,316
3.11
2,004
280.6
FY15E
New % Change
3,405
2.4
3,393
2.3
3.15
4 bps
2,001
-0.2
280.3
-0.1
Source: Company, ICICIdirect.com Research
Assumptions
FY14
18.4
10.8
FY15E
26.2
20.0
FY16E
23.6
19.2
Earlier
FY15E
FY16E
22.0
22.1
17.9
19.3
CASA ratio (%)
18.9
22.0
NIM Calculated (%)
2.8
2.9
Cost to income ratio (%)
38.4
39.4
GNPA (| crore)
94.3
174.9
NNPA (| crore)
7.0
26.1
Slippage ratio (%)
0.6
0.8
Credit cost (%)
0.5
0.5
Source: Company, ICICIdirect.com Research
24.8
3.1
39.0
357.4
80.4
0.9
0.5
28.1
3.3
39.2
418.1
86.4
0.4
0.5
25.2
3.1
39.5
276.7
72.3
0.5
0.4
Credit growth (%)
Deposit Growth (%)
FY13
23.7
36.2
ICICI Securities Ltd | Retail Equity Research
28.6
3.2
39.9
334.7
69.0
0.4
0.4
Comments
Branch addition and higher savings rate will aid the improvement in CASA ratio
Asset quality may remain healthy for FY15E and FY16E
Credit cost has been raised to 0.5% vs 0.4%
Page 2
Company Analysis
Credit to grow at healthy 22% CAGR, SME/retail proportion to rise…
Over the years, Yes Bank has grown its credit almost entirely on the back
of the corporate sector, which constitutes ~85% of its outstanding credit
of | 55200 crore as on FY14. In Q3FY15, the credit book increased
strongly by 32% YoY to | 66610 crore mainly seeing an uptick in SME and
retail segment growth on a QoQ basis.
Exhibit 1: Credit to grow at 22% CAGR in FY14-16E
100000
71.0
78.8
75
Deposit
66607
82370
70187
89028
86734
106158
Q3FY15
FY15E
FY16E
62030
80131
Q2FY15
58989
76103
Q1FY15
70
55633
74192
47000
66956
FY13
Credit
z
FY14
37989
49152
0
FY12
20000
77.5 77.4
81.7
80
70.2
40000
34364
45939
requirement by quite a margin
60000
FY11
lending
22193
26799
agriculture
FY10
direct
75.0
12403
16169
13%
74.8
FY09
its
76.7
80000
9430
13273
under-achieved
(| crore)
year’s adjusted net bank credit. However, Yes Bank has
80.9
77.3
FY08
sector lending requirement, which is 40% of the previous
85
82.8
(%)
120000
The bank fell short by less than 2% in fulfilling the priority
65
60
CD ratio (RHS)
Source: Company, ICICIdirect.com Research
Large corporate constitutes 63.3% while mid-corporate and SME/retail
constitute 15.5% and 21.2%, respectively, as on FY14. Within the
SME/retail category, pure consumption/retail credit is ~10% while the
balance is SME credit. Now the break-up is corporate segment forms
68.7% while retail/SME form 31.3% of credit. We estimate credit will grow
at a healthy 22% CAGR to | 82875 crore in FY14-16E aided by faster
growth in the SME/retail segment.
Exhibit 2: Majority of credit growth contributed by corporate during FY07-14; going ahead, SME/retail proportion to rise
Large Corporate
Mid Corporate
Sme/Retail
Total
FY08
5092
4149
189
9430
FY09
7752
3622
1029
12403
FY10
15335
5681
1176
22193
FY11
22370
7869
4124
34363
FY12
22869
8206
6914
37989
FY13
30409
8037
8554
47000
FY14
35216
8623
11794
55633
Q2FY15
44289
8994
8746
62029.7
Q3FY15
45759
Current
proportion
68.7
20851
66610.0
31.3
100.0
Source: Company quarterly presentation, ICICIdirect.com Research
The management guided that the proportion of SME/retail may increase
from 21% now to 28-30% of total credit. Being a high yielding segment, it
will support NIM improvement from 2.9% in FY14 to 3.2% in FY16E.
The pure consumption/retail credit is mere ~10% of credit now. Even if it
grows rapidly during FY14-16E, it will still be an insignificant portion
(~15%) of Yes Bank’s total credit. Thus, we believe Yes Bank will largely
remain a corporate lender even till FY16E.
Exhibit 3: Customer assets to grow at 19% CAGR over FY14-16E
As per version 2.0, the total credit (including credit
substitute) target stood at | 1 lakh crore by FY15E, which
is unlikely to be achieved owing to the economic
slowdown. We estimate total customer assets (including
credit substitute) of | 84894 crore by FY15E and | 102177
crore by FY16E
ICICI Securities Ltd | Retail Equity Research
Loans
Credit substitute
Customer assets
FY11
34363
3976
38339
FY12
37989
8131
46120
FY13
47000
13357
60356
FY14
55633
14007
69640
FY15E
70187
14707
84894
FY16E
86734
15442
102177
Source: Company quarterly presentation, ICICIdirect.com Research
Along with usual bank credit, Yes Bank conducts its lending business in
the form of credit substitute, which is classified under investments in
balance sheet. Here, the bank subscribes to the bond issued by large
corporates wherein the interest rate earned is low in the 9-10.5% range
Page 3
lower than Yes Bank’s base rate. The long term strategy of the bank is to
gain access to large corporate and enable Yes Bank to generate other fee
related business. On the flip side, the book is subject to MTM provision
on a quarterly basis unlike usual bank credit. If there is any MTM gain, it
will not be accounted and profits can be booked only by selling the
investment.
The bank has built its credit substitute book mainly during FY11-13 and
was sitting on hefty MTM gains during Q4FY13 when yields were trending
south (G-sec yield below 7.5%). However, all MTM gains were wiped off
in FY14 when yields again trended north (G-sec yield now at ~9%).
Going ahead, the management intends to grow its business by usual
credit rather than credit substitute for FY14-16E. The average duration of
the credit substitute book is 2.7 years and a major portion of the book is
hedged by interest rate swaps. We do not foresee any major MTM
provision hit in FY15-16E. There was write-back of provisions in 9MFY15.
Deposits mainly wholesale funded– pose high interest rate risk
Yes Bank has largely been a wholesale funded bank, which makes its
liability franchise weak, thereby impacting its NIM. Unlike retail deposits,
wholesale deposits are more sensitive to interest rates making them
volatile in nature. Hence, Yes Bank tends to benefit significantly if interest
rates trend south and is adversely impacted if interest rates trend north.
However, the bank has successfully managed its cost of fund and
consistently maintained its NIM in the range of 2.8-3% in the past five
years despite a volatile interest rate scenario.
Exhibit 4: Liability franchise steadily strengthening as bulk deposit proportion reduces
(| crore)
Total Deposits
Current account deposit
Saving deposit
SA ratio (%)
CASA ratio (%)
Bulk deposit (%)
FY08
13273
982
147
1
8.5
-
FY09
16169
1220
192
1
8.7
-
FY10
26799
2427
391
1
10.5
-
FY11
45939
3934
817
2
10.3
77
FY12
49152
4888
2504
5
15.0
67
FY13
66956
6665
6023
9
18.9
65
FY14
74192
7017
9328
13
22.0
58
Q3FY15
82370
7730
10890
13
22.6
58
FY15E
89028
8079
13991
16
24.8
54
FY16E
106158
9539
20287
19
28.1
49
Source: Company quarterly presentation, ICICIdirect.com Research
Saving deposits – The bank has struggled to mobilise significant saving
deposit till FY12 while it got a major fillip post the saving rate deregulation by RBI in September 2012. Yes Bank offers highest interest rate
of 7% on saving deposits with balance above | 1 lakh and 6% on balance
below | 1 lakh. Along with high saving interest rates, the bank has been
widening its branch network (number of branches increased from 214 in
FY11 to 560 in FY14), which will support strong traction in saving
deposits. We estimate a CASA ratio of 28.1% by FY16E.
Retail term deposits – Retail term deposits/fixed deposits are steady by
nature and less sensitive to interest rates. These deposits have grown at
34.8% CAGR during FY11-14 and constitute 20% of total deposit. A
widening branch network will support the growth momentum of retail
term deposits, which we expect to comprise 22.9% of deposit in FY16E.
Bulk/wholesale deposit – We have considered ex-retail deposits as bulk
deposits. Its proportion has steadily declined from 76.5% in FY11 to 58%
in FY14 and is expected to further reduce to 48.5% by FY16E. Although
declining sharply, it still constitutes a significant chunk of total deposits.
Among peers, a few private banks have bulk deposit proportion of 3550% while the rest of the banking industry is much below at 20-25%.
Overall, an improvement in deposit structure will aid in containing cost of
funds and improve reported NIM from 2.9% in FY14 to 3.2% in FY16E.
ICICI Securities Ltd | Retail Equity Research
Page 4
Reported NIM to improve gradually to 3.2% in FY16E
Despite a volatile interest rate scenario, the bank has managed NIM in the
2.8-3.0% range consistently. Going ahead, we have revised upward the
NIM of the bank and expect it to improve to 3.3% in FY16E vs. 3.2%
earlier as i) cost of fund is contained with CASA ratio rising and ii) the
proportion of high yielding SME/retail credit increases.
Exhibit 5: Reported NIM consistently maintained in healthy range of 2.8-3.0%
12
11.3
10
10.1
8
7.9
8.9
8.3
(%)
6
3.0
2.9
2.6
2
10.5
10.6
10.7
10.6
7.7
7.6
7.5
7.4
7.3
2.7
2.8
2.9
3.1
3.3
6.3
5.9
4
10.5
9.3
2.9
0
FY08
FY09
FY10
FY11
NIM
FY12
FY13
Yield on asset
FY14
FY15E
FY16E
Cost of fund
Source: Company quarterly presentation, ICICIdirect.com Research
* All figures are calculated
Other income
Exhibit 6: Other income growth improves in Q2FY15
300
(| crore)
250
200
150
FY12
FY13
Q1FY14 Q2FY14 Q3FY14 Q4FY14
FY14
132
100
233
73
132
104
211
58
140
35
198
53
1497
478
607
214
134
54
176
82
110
71
163
44
91
180
124
52
88
174
144
37
0
323
252
550
132
50
237
183
363
74
100
Q1FY15 Q2FY15 Q3FY15
Trade guarantee (Transaction banking)
Financial Markets (Treasury)
Financial Advisory
Third party distribution (Retail banking)
Source: Company quarterly presentation, ICICIdirect.com Research
One should note that Q2FY14 involved a one-off treasury gain of | 111
crore. There was a sharp rise in interest rates during July 2013 when RBI
had hiked MSF rates. To hedge itself, Yes Bank had entered into interest
rate swaps by going long on interest rates. This led to a one-off gain of
| 111 crore in Q2FY14 as G-sec yields had risen from sub 7.5% level to
~9%. Earlier interest rate swaps are lower compared to previous
balances.
In Q3FY15, other income grew 38% YoY to | 537 crore vs. | 566 crore
estimated by us with treasury gain being lower than estimated at | 99.6
crore vs. | 104 crore QoQ. Retail fees improved QoQ to | 72.9 crore vs. |
58.3 crore, due to higher growth and retail sales.
ICICI Securities Ltd | Retail Equity Research
Page 5
Superior asset quality to be maintained
198
42.8
222.36
53.88
Q1FY15
Q2FY15
418.1
86.4
174.9
26.1
FY14
(%)
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
-
FY16E
94.3
7.0
FY13
357.4
80.4
83.9
17.5
FY12
GNPA ratio (RHS)
FY15E
80.5
9.2
FY11
NNPA
278.66
64.52
60.2
13.0
FY10
GNPA
Q3FY15
84.9
41.2
FY09
FY08
they increased sharply from | 116 crore QoQ
(| crore)
Restructured assets are negligible at | 170 crore though
450
400
350
300
250
200
150
100
50
0
10.6
8.5
Exhibit 7: Asset quality to remain healthy
NNPA ratio (RHS)
Source: Company, ICICIdirect.com Research
On the asset side, the bank has ~85% exposure towards corporates,
which poses concentration risk. Large corporates (sales above | 1000
crore) constitute 63.3%, mid-corporate– 15.5% and SME/retail– 21.2%.
Despite having major exposure to corporate, the asset quality saw an
increase but is still manageable with GNPA of | 278 crore, NNPA of | 65
crore and restructured assets of mere | 116 crore as on Q2FY15. A strong
credit monitoring mechanism will support the stable asset quality in
FY15E and FY16E.
Tier 1 ratio in comfort zone considering modest growth scenario
Exhibit 8: Adequately capitalised for growth
14
12
(%)
10
8
6
11.9
4.8
12.2
5.2
12.6
5.4
9.5
5.9
9.8
4.6
9.5
8.8
FY11
FY12
FY13
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15
Tier I
9.9
6.2
9.9
8.0
0
9.7
6.8
2
9.5
6.1
4
Tier II
Source: Company quarterly presentation, ICICIdirect.com Research
Yes Bank has raised | 2952 crore via QIP in June. The benefit of the same
was seen in Q2FY15 as it was raised at the fag end of the quarter. The full
benefit was seen in Q2FY15 wherein margins improved ~20 bps. Also,
strong growth in CASA deposits during Q2FY15 enabled strong margins
for the quarter. However, in Q3FY15, building the liquidity coverage ratio
(LCR) under Basel III led the margin to remain stable at 3.2% despite the
cost of funds being 20 bps lower. The bank now holds 6% excess SLR for
maintaining LCR.
ICICI Securities Ltd | Retail Equity Research
Page 6
Exhibit 9: Leverage at marginally higher levels
FY07
2.2
2.5
4.8
2.5
2.3
0.4
1.2
11.2
13.9
Net interest income/ avg. total assets
Non-interest income/ avg. total assets
Net total income/ avg. total assets
Operating expenses/ avg. total assets
Operating profit/ avg. total assets
Provisions/ Avg. total assets
Return on avg. total assets
Leverage -Avg. total assets/ average equity
Return on equity
FY08
2.4
2.5
4.9
2.4
2.5
0.3
1.4
13.3
19.0
FY09
2.6
2.2
4.8
2.1
2.7
0.3
1.5
13.6
20.8
FY10
2.7
1.9
4.6
1.7
2.9
0.5
1.6
12.6
20.3
FY11
2.6
1.3
3.9
1.4
2.5
0.2
1.5
13.9
21.1
FY12
2.4
1.3
3.7
1.4
2.3
0.1
1.5
15.7
23.1
FY13
2.6
1.5
4.0
1.5
2.5
0.2
1.5
16.5
24.8
FY14
2.6
1.7
4.3
1.7
2.6
0.3
1.6
16.1
25.0
FY15E
2.8
1.8
4.6
1.8
2.8
0.4
1.7
12.8
21.2
FY16E
3.0
1.8
4.7
1.9
2.9
0.3
1.8
11.3
20.4
Source: Company, ICICIdirect.com Research
Lucrative return ratios to stay
An all-round healthy performance is expected to support PAT, which has
been revised upwards to grow at a CAGR of 27% from | 1617.8 crore in
FY14 to | 2617 crore in FY16E. This will support return ratios to also surge
to 1.8% RoA and 20% RoE for FY16E.
Exhibit 10: Consistent RoA of 1.5%+ and RoE of 20%+
30
2.2
(%)
2.0
1.8
1.6
1.4
1.2
26.7
24.4 24.3 25.0
25
21.2 20.4 20
19.0
18 19.2
1.8 15
1.8
1.7
1.7
1.6
1.6
1.6 1.6 1.6 1.6
1.5
1.5 1.5 1.5
1.5
10
1.4
5
20.8 20.3 21.1
23.1
24.8
23.1
21.6
1.0
RoA
FY16E
FY15E
Q3FY15
Q2FY15
Q1FY15
FY14
Q4FY14
Q3FY14
Q2FY14
Q1FY14
FY13
FY12
FY11
FY10
FY09
FY08
0
RoE (RHS)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 7
(%)
2.4
Outlook and valuation
Although Yes Bank is more sensitive to an economic slowdown and high
interest rates, it has successfully managed to deliver a consistent
performance. The stock has the potential to be re-rated if such
consistency continues.
At the CMP, the stock is trading at 1.9x its FY17E ABV, which is at a
discount to its peers. Although the bank has the potential to narrow this
gap, we believe it will continue to trade at marginal discount as i) its
exposure to the corporate sector is concentrated; ii) it has relatively
unseasoned liability franchise currently compared to peers and iii) RoA of
1.5% is marginally lower than peers.
We raise our PAT CAGR expectation over FY14-16E from 26% to 27%
and 29% for FY17E, increasing our credit growth and margin estimates.
Rolling over to FY17E, valuing at 2.1x FY17E ABV, we raise our target
price to | 890 from | 797 earlier. We maintain BUY rating on the stock.
Exhibit 11: Valuation
FY13
FY14
FY15E
FY16E
NII
(| cr)
2,219
2,716
3,405
4,317
Growth
(%)
37.3
22.4
25.4
26.8
PAT
(| cr)
1,300.7
1,617.8
2,000.8
2,617.9
Growth
(%)
33.1
24.4
23.7
30.8
PE
(x)
21.5
17.4
16.2
12.4
ABV
(|)
161.7
196.8
280.3
332.7
P/ABV
(x)
4.8
4.0
2.8
2.3
RoA
(%)
1.5
1.6
1.7
1.8
RoE
(%)
24.8
25.0
21.2
20.4
[
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 8
Company snapshot
1,000
Target price: | 890
900
800
700
600
500
400
300
200
100
Jan-16
Jul-15
Jan-15
Jul-14
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
0
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
FY04
Jul-05
FY08
Event
The bank was incorporated on November 21, 2003 while it obtained its certificate of commencement of business in January 2004
In June 2005, Yes Bank came out with a public issue of | 315 crore at a price of | 45
Stock rallies in past two years with Yes Bank growing its credit and PAT at a rapid pace albeit on a small base
FY09
Although financials remained healthy, the stock took a severe hit as risk was high with Yes Bank relying on wholesale funds; NPAs were expected to increase
significantly
It launched version 2.0 with a vision to establish 750 branches, 3000 ATMs, 12000 employees, | 125000 crore deposit, | 100000 crore credit by FY15E
Savings rate de-regulated, Yes Bank became the first bank to offer high interest rate of 7% above | 1 lakh and 6% below | 1 lakh
Launches six new retail product offering - auto loans, commercial vehicle loan, small busines loan, LAP, LAS, etc. Ties with DHFL for home loan
RBS said to be in talks with Yes Bank for sale of assets in India
Stock rallies during FY09-13 as Yes Bank successfully sees out the recession and delivers 39.5% credit CAGR, 43.6% PAT CAGR with limited NPAs
Yes Bank is highly sensitive to interest rates as it is largely wholesale funded. Rates were trending down during H2FY13, which supported the stock rally
Stock also rallies in past few months as QIP rumours pick up pace
RBI tightens liquidity by raising MSF rate by 3% and various other measures. Yes Bank impacted due to its heavy reliance on short-term and wholesale deposits
for funding. Also, its ALM is not adequately matched with 81% of its deposits maturing within a year against 59% of advances
Arrival of new RBI Governor changes sentiment, eases few tight liquidity measures to which Yes Bank is highly sensitive, LIC buys 3% stake
Becomes first bank to take advantage of RBI's concessional swap window for foreign borrowing at 1% lower swap rate. Yes raised ~| 1600 crore
Raises ~| 3000 crore via QIP
FY11
FY12
FY12
Jan-13
Feb-13
Feb-13
May-13
Jul-13
Sep-13
Sep-13
Jun-14
Source: Company, ICICIdirect.com Research
Top 10 Shareholders
Shareholding Pattern
Rank
1
2
3
4
5
6
7
8
9
10
(in %)
Promoter
FII
DII
Others
Name
Latest Filing Date % O/S Position (m) Change (m)
Kapur (Madhu & Family)
30-Sep-14 8.42
35.1
0.0
Life Insurance Corporation of India
30-Sep-14 7.33
30.6
0.0
Kapoor (Rana)
30-Sep-14 4.79
20.0
0.0
Yes Capital (India) Pvt. Ltd.
30-Sep-14 3.62
15.1
0.0
Morgan Credits Pvt. Ltd.
30-Sep-14 3.37
14.1
0.0
Deutsche Asset & Wealth Management Investment Gmb
30-Sep-14 2.71
11.3
-0.6
Franklin Advisers, Inc.
30-Nov-14 2.36
9.9
1.4
Franklin Templeton Asset Management (India) Pvt. Ltd.
30-Sep-14 2.36
9.9
1.3
UBS Global Asset Management (Switzerland)
30-Sep-14 2.29
9.6
-0.2
Fidelity Management & Research Company
30-Nov-14 2.13
8.9
0.4
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14
25.6
25.6
25.6
22.2
22.1
35.4
39.8
38.0
45.0
46.3
15.4
19.0
21.0
20.4
19.7
12.7
15.6
15.5
12.3
11.9
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
Pictet Asset Management Ltd.
Citigroup Inc
Franklin Advisers, Inc.
Franklin Templeton Asset Management (India) Pvt. Ltd.
Columbia Management Investment Advisers, LLC
ICICI Securities Ltd | Retail Equity Research
Value
50.67m
48.92m
15.35m
15.14m
12.02m
Shares
5.61m
5.42m
1.35m
1.33m
1.33m
Sells
Investor name
T. Rowe Price Hong Kong Limited
Columbia Wanger Asset Management, LLC
William Blair & Company, L.L.C.
BlackRock Institutional Trust Company, N.A.
PIMCO Europe Ltd.
Value
-32.37m
-24.77m
-21.41m
-16.46m
-10.83m
Page 9
Shar
-7.05
-3.58
-2.74
-2.37
-1.20
Financial summary
Profit and loss statement
(Year-end March)
Interest Earned
Interest Expended
Net Interest Income
Growth (%)
Non Interest Income
Fees and advisory
Treasury Income and sale of Invt.
Other income
Net Income
Employee cost
Other operating Exp.
Operating Income
Provisions
PBT
Taxes
Net Profit
Growth (%)
EPS (|)
| Crore
FY14
9981.4
7265.1
2716.3
22.4
1721.6
1260.9
166.2
294.5
4437.8
784.4
965.5
2688.0
361.7
2326.3
708.5
1617.8
24.4
44.9
FY15E
11534.4
8129.4
3405.0
25.4
2159.9
1513.1
249.2
397.5
5564.9
1009.7
1162.7
3392.6
471.7
2920.9
920.1
2000.8
23.7
48.2
FY16E
13801.6
9484.3
4317.3
26.8
2558.9
1815.7
274.2
469.0
6876.2
1268.9
1425.4
4181.9
489.6
3692.3
1074.5
2617.9
30.8
63.0
Key ratios
(Year-end March)
Valuation
No. of Equity Shares
EPS (Rs.)
BV (Rs.)
ABV (Rs.)
P/E
P/BV
P/ABV
Yields & Margins (%)
Net Interest Margins
Yield on assets
Avg. cost on funds
Yield on average advances
Avg. Cost of Deposits
Quality and Efficiency (%)
Cost to income ratio
Credit/Deposit ratio
GNPA
NNPA
ROE
ROA
FY17E
16497.9
10918.9
5579.0
29.2
2902.9
2178.9
219.3
504.7
8481.9
1555.6
1638.9
5287.4
528.5
4758.9
1384.8
3374.0
28.9
81.3
Source: Company, ICICIdirect.com Research
FY14
FY15E
FY16E
FY17E
360.6
44.9
197.5
196.8
17.4
4.0
4.0
415.3
48.2
282.2
280.3
16.2
2.8
2.8
415.3
63.0
334.8
332.7
12.4
2.3
2.3
415.3
81.3
416.0
413.0
9.6
1.9
1.9
2.9
10.6
7.5
12.7
8.0
3.1
10.7
7.4
12.7
7.5
3.3
10.6
7.3
12.4
7.5
3.6
10.6
7.1
12.0
7.3
39.4
75.0
0.3
0.0
25.0
1.6
39.0
78.8
0.5
0.1
21.2
1.7
39.2
81.7
0.5
0.1
20.4
1.8
37.7
82.2
0.5
0.1
21.6
2.0
FY15E
22.1
26.2
20.0
17.0
25.4
24.1
26.2
23.7
64.6
7.4
FY16E
18.2
23.6
19.2
19.5
26.8
24.0
23.3
30.8
18.6
30.8
[
Source: Company, ICICIdirect.com Research
Balance sheet
| Crore
(Year-end March)
Sources of Funds
Capital
Reserves and Surplus
Networth
Deposits
Borrowings
Other Liabilities & Provisions
Total
FY14
FY15E
FY16E
FY17E
360.6
6761.1
7121.7
74192.0
21314.3
6387.7
109015.8
415.3
11304.3
11719.6
89027.9
24925.0
7395.8
133068.2
415.3
13486.2
13901.4
106157.8
28574.5
8605.8
157239.6
415.3
16860.2
17275.5
128045.4
32120.9
10125.8
187567.6
Application of Funds
Fixed Assets
Investments
Advances
Other Assets
Cash with RBI & call money
Total
293.5
40950.4
55633.0
6247.3
5891.7
109015.8
363.9
46653.8
70187.0
8958.7
6904.8
133068.2
454.5
52972.8
86734.4
8889.5
8188.4
157239.6
572.7
60165.9
105293.4
11797.6
9738.0
187567.6
Growth ratios
(Year-end March)
Total assets
Advances
Deposit
Total Income
Net interest income
Operating expenses
Operating profit
Net profit
Net worth
EPS
(%)
FY14
10.0
18.4
10.8
22.5
22.4
31.1
25.5
24.4
22.6
23.7
FY17E
19.3
21.4
20.6
18.6
29.2
18.6
26.4
28.9
24.3
28.9
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
.
ICICI Securities Ltd | Retail Equity Research
Page 10
ICICIdirect.com coverage universe (Banking)
Sector / Company
Bank of India (BANIND)
Bank of Baroda (BANBAR)
Dena Bank (DENBAN)
Punjab National Bank (PUNBAN)
State Bank of India (STABAN)
Syndicate Bank (SYNBN)
Axis Bank (UTIBAN)
City Union Bank (CITUNI)
DCB Bank (DCB)
Federal Bank (FEDBAN)
HDFC Bank (HDFBAN)
IndusInd Bank (INDBA)
Jammu & Kashmir Bank(JAMKAS)
Kotak Mahindra Bank (KOTMAH)
South Indian Bank (SOUIN0)
Yes Bank (YESBAN)
CMP
(|)
301
1,103
61
210
316
133
520
96
120
151
985
834
153
1,405
31
810
EPS (|)
M Cap
TP(|) Rating
(| Cr) FY14 FY15E FY16E
317
Buy 17,987
42
46
55
1,250
Buy 46,464 105 136 160
60 Hold
3,291
10
8
12
279
Buy
7,412
18
21
25
374
Buy 235,880
15
18
21
141 Hold
7,975
27
25
32
550
Buy 122,485
26
30
34
100 Hold
4,655
6
7
9
140
Buy
3,106
6
6
8
164
Buy 12,902
10
12
14
1,036 Hold 235,127
35
41
50
925
Buy 43,711
27
33
41
152 Hold
7,405
24
18
28
1,250 Hold 107,728
20
22
26
26 Hold
4,119
4
4
4
890
Buy 34,171
45
48
63
P/E (x)
P/ABV (x)
RoA (%)
RoE (%)
FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E FY14 FY15E FY16E
7.1
6.5
5.5 0.9 1.0 0.9 0.5 0.5 0.5
10
10
11
10.5
8.1
6.9 1.6 1.4 1.3 0.8 0.8 0.8
13
15
16
6.0
7.8
5.2 0.7 0.9 0.9 0.5 0.3 0.4
9
6
8
11.4 10.2
8.4 1.5 1.5 1.3 0.6 0.6 0.7
10
10
11
21.7 17.3 14.8 2.7 2.4 2.2 0.6 0.7 0.7
10
11
12
4.8
5.3
4.1 1.0 1.0 0.9 0.7 0.6 0.6
15
13
15
19.6 17.2 15.4 3.3 2.8 2.5 1.7 1.7 1.7
17
17
17
15.0 14.5 11.2 2.9 2.3 1.9 1.4 1.4 1.6
19
17
17
19.8 18.6 15.4 2.9 2.4 2.1 1.3 1.3 1.3
15
14
13
15.4 12.7 10.6 1.9 1.8 1.6 1.2 1.3 1.3
13
14
15
27.9 23.8 19.6 5.5 4.1 3.5 1.9 1.9 2.0
21
20
19
31.1 25.0 20.1 5.0 4.3 3.7 1.8 1.8 1.9
17
18
19
6.3
8.5
5.5 1.3 1.4 1.2 1.6 1.0 1.4
22
14
19
72.0 63.7 54.6 9.1 8.1 7.2 1.8 1.8 1.8
14
13
13
8.2
8.2
7.6 1.4 1.3 1.2 1.0 0.8 0.8
17
14
15
18.3 17.0 13.0 4.2 2.9 2.5 1.6 1.7 1.8
25
21
20
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 11
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
ICICI Securities Ltd | Retail Equity Research
Page 12
ANALYST CERTIFICATION
We /I, Kajal Gandhi, CA, Vasant Lohiya, CA and Sheetal Ashar, CA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report.
Terms & conditions and other disclosures:
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a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general
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and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
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It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Sheetal Ashar, CA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the
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ICICI Securities Ltd | Retail Equity Research
Page 13