3 May 2012
Update | Sector: Financials
Yes Bank
BSE SENSEX
S&P CNX
17,151
5,188
CMP: INR338
TP: INR450
Buy
Expanding liability franchise
Aiming at strong growth with superior profitability
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel.Perf.(%)
M.Cap. (INR b)
M.Cap. (USD b)
YES IN
353.0
389/231
-7/11/25
119.3
2.3
We attended Yes Bank's (YES) annual investor conference wherein management
reiterated its commitment of increasing granularity of balance sheet (to reduce Risk),
building scale (for sustainability of superior return ratio) and efficient capital usage.
Rapid branch expansion, new customer acquisitions, strong corporate relationships
and deepening existing customer relationships should help maintain higher than
industry asset growth and improve liability structure.
Management guides sustainable RoE of 22-24%. Maintain Buy.
Valuation summary
Y/E March
2012 2013E 2014E
NII (INR b)
16.2 21.1 26.4
OP (INR b)
15.4 19.8 24.9
NP (INR b)
9.8 12.2 15.0
EPS (INR)
27.7 34.5 42.5
EPS Gr. (%)
32.1 24.5 23.3
P/E (x)
12.2
9.8
8.0
BV/Sh. (INR) 132.5 161.7 197.7
P/BV (x)
2.6
2.1
1.7
ABV (INR)
132.2 161.3 196.0
P/ABV (x)
2.6
2.1
1.7
ROE (%)
23.1 23.4 23.6
ROA (%)
1.5
1.5
1.5
Shareholding pattern % (Mar-12)
Others, 11.1
Promoter
26.1
Foreign,
51.9
Domestic
Inst, 10.9
Stock performance (1 year)
Yes Ba nk
Sens ex - Rebas ed
420
360
300
240
180
Key takeaways from Yes Bank’s Annual Investor Conference:
Focused approach on CASA and retail term liabilities
YES intends to strengthen its retail liability franchise and has raised its guidance
of overall branch network to 900 branches by FY15 from 750 branches earlier.
With rapid branch expansion, differentiated product offerings (6-7% interest
rate on SA balances and products like YES Vijay), and leveraging of strong corporate
and SME relationships, YES expects to achieve CASA ratio of 30% by FY15 (15% at
the end of FY12) and increase the share of retail term deposits to 36% by FY15 as
compared to 18% in FY12.
Growth guidance of 30%+ unchanged; Focusing on high yielding loans
Overall loan book guidance remains unchanged at INR1t by FY15, implying a CAGR
of ~38% over FY12-15 and 29% if credit substitutes are included. YES also
maintained its guidance of increasing its balance sheet size to INR1.5t by FY15,
implying a CAGR of ~27% over FY12-15. The incremental growth drivers would be
SME and retail segments; managment targets to increase the proportion of
commercial banking and branch banking to 30% each as against 22% and 18%,
respectively at the end of FY12.
Other highlights:
In-line with the increase in branch network guidance YES has also increased
its guidance on overall employees to 12,750 by FY15 from 12,000 earlier
(currently at ~5,640).
YES does not want to grow at the cost of profitability and has guided for RoA
of 1.5-1.7% and RoE of 22-24% over FY12-15.
At CASA ratio of ~20% and ~30%, YES guided for NIM of 3.1% and ~3.5%
respectively.
Valuation and view:
Diversified fee income stream, sound ALM (NIM has
remained at 2.8-3% irrespective of liquidity conditions) and strong control over
opex and asset quality are the key strengths for YES. With deregulated savings
deposit rates, strong branch expansion and focused strategies, we expect savings
deposit traction to remain healthy. While operating parameters remain strong,
any negative surprise on asset quality remains a key risk to RoA and RoE estimates
of 1.5%+ and 23%+. We expect EPS CAGR of ~24% over FY12-14 (without assuming
dilution), on the back of 42% EPS CAGR over FY08-12. Maintain
Buy.
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 5415.
Sohail Halai
(Sohail.Halai@motilaloswal.com)+ 91 22 3982 5430