investor s eye

stock update

Yes Bank
Stock Update

Emergin g Star

Stron g ope ratin g performanc e

Compan y details Pric e target : Marke t cap : 52 wee k high/low : NSE volume : (No of shares) BSE code : NSE code : Sharekha n code : Fre e float : (No of shares) Shareholdin g pattern Public & others 14% Rs360 Rs9,997 cr Rs388/236 24 lakh 532648 Y E SB A N K Y E SB A N K 25.9 cr

Buy; CMP: Rs285

Resul t highlights Yes Banks Q2FY2012 result s were ahea d of our estimate s as net profit s grew 33% yea r on year (YoY) and 8.8% quarte r on quarte r (QoQ) to Rs235 crore . This was on accoun t of a strong growth in net interes t income (NII; 23% YoY) and a robust growth in the non interes t income (63.4% YoY). The net interes t margin expanded by 10 basis points (bps) sequentiall y to 2.9%, aide d by repricin g of advance s and containmen t of funding cost by a diversifie d borrowing mix. The advance s grew by 12.7% YoY while including the credi t substitute s it grew by 27.4% YoY. The asse t qualit y largely remaine d stabl e while restructure d asset s grew to 0.5% of loans due to restructurin g of the micro financ e institutio n (MFI) loans . We believe the bank would continu e to grow significantl y ahea d of the industr y and is likely to retai n its asse t qualit y. We expec t the banks earning s to grow at a compounded annua l growth rat e (CAGR) of 27% over FY2011-13. We maintai n our Buy recommendatio n with a price targe t of Rs360 (2x FY2013E book value [BV]) for the stock. Health y growt h in NII: The N II of the bank grew by 23.1% YoY and 8.9% QoQ to Rs385.6 crore majorly led by a strong growth in advances (including credit substitutes ) and expansio n in margins . The core advance s grew at a slower rate ie at 12.7%, while including credi t substitute s it grew by 27.4% YoY. Within advances , the branc h banking segmen t reporte d a strong growth of 58% YoY (24% QoQ), followe d by the commercia l banking segmen t (36.8% YoY). The managemen t has guided for an over 25% growth in core advance s for FY2012. Margins expan d 10bp s QoQ to 2.9%: The N IM of the bank grew by 10bps sequentiall y to 2.9% from 2.8% in the previou s quarte r. This was majorl y led by an uptick in the yield on advance s which grew by 60bps QoQ to 12.2% contributed by the re-pricin g of the advances . Furthe r the funding costs were contained leading to an only 10bps Q-o-Q increas e in the cost of funds . The curren t ac- count-saving s accoun t (CASA ratio of the bank was also stabl e at ) 11% as against 10.9% in the previou s quarte r.
Resul t tabl e Particulars Interes t earned Interes t expense Q2FY12 1,438.7 1,053.0 385.6 214.1 599.7 213.8 110.0 103.8 385.9 37.9 348.1 113.0
Sharekhan

Promoter 26%

Foreign 50%

MF & FI 10%

Pric e chart
400 370 340 310 280 250 220

(Rs cr) Q2FY11 953.8 640.6 313.2 131.0 444.2 162.8 87.8 75.0 281.4 17.4 264.0 87.7 % YoY 50.8 64.4 23.1 63.4 35.0 31.3 25.3 38.4 37.1 117.1 31.9 28.9 Q1FY12 1,399.5 1,045.4 354.2 165.3 519.5 194.4 109.8 84.6 325.1 1.5 323.6 107.5 % QoQ 2.8 0.7 8.9 29.5 15.4 10.0 0.1 22.8 18.7 2407.9 7.6 5.1

Jan-11

Oct-10

Jul-11

Apr-11

Oct-11

Net interes t income Other income Total income Operatin g expenses - Employee cost - Other Costs Ope ratin g profit Provisions PBT TAX 5

Pric e performance 1m 3m

(%) Absolute Relative to Sensex

6m

12m

2.1 -10.4 0.1 -2.4

-9.6 -15.7 0.1 -2.8

Octobe r 20, 2011

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investor s eye

PAT

235.0

176.3

33.3

216.1 stock update 8.8

Sharekhan

Octobe r 20, 2011

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Robus t growt h in non interes t income : The non interes t income of the bank grew by 63.4% YoY and 29.5% QoQ to Rs214 crore majorl y led by a strong growth in the financia l advisory income (54% YoY and 18% QoQ) followe d by financia l marke t income which grew by 191% YoY to Rs41 crore) . The transactio n banking in- come also grew by 59% YoY and 45% QoQ while retail fees dippe d by 3% YoY. Cost-incom e rati o declines : The cost to income ratio of the bank also declined to 35.6% in Q2FY2012 as against 36.6% in Q2FY2011 and 37.4% in Q1FY2012. The bank has adde d 50 branche s during the quarter thereb y increasin g the branc h tally to 305. Asset qualit y remain s stable : The asse t qualit y of the bank remaine d stabl e with gross and net non perform- ing assets (NPAs) at 0.2% and 0.04% respectively as agains t 0.17% and 0.01% in the previou s quarte r. How- ever the bank restructure d loans worth Rs90 crore (mainly pertainin g to micro financ e companies ) dur- ing the quarte r thereb y increasin g the restructured
Tren d in NIM
3.40% 3.20% 3.00% 2.80% 2.60% 2.40% 2.20% 2.00%

loans to 0.5% of the advance s (Rs175 crore) . The specific loan loss coverag e ratio decline d sharply to 80.2% from 95.2% in the previou s quarte r. Capita l Adequac y Ratio : The capita l adequac y ratio (CAR) of the bank stand s at 15.98% and the tier I capital stand s at 9.4%. The bank has raise d Rs322 crore of lower tier II capita l during the quarte r. We have assumed a 10% equit y dilutio n in FY2013 estimate s to facto r the possible dilution. Outlook : Yes Bank delivere d a strong set of numbers in Q2FY2012 driven by a strong operatin g performance and health y asse t qualit y. The increas e in N IM was a positiv e surprise , though it could declin e slightly in the coming quarter s due to a low C A S base and high A interes t rates . We believ e the bank would continu e to grow significantl y ahea d of the industr y and is likely to retai n its asse t qualit y. We expec t the banks earnings to grow at a CAGR of 27% over FY2011-13. We maintai n our Buy recommendatio n with a price target of Rs360 (2x FY2013 BV) for the stock. E

Advanc e deposi t growth

35 .0 % 30 .0 % 25 .0 % 20 .0 % 15 .0 % 10 .0 % 5.0% 0.0% -5 .0 %
Q1 FY08 Q2 FY08 Q3 FY08 Q4 FY08 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 1QFY12 2QFY12

Q3 FY09

Q4 FY09

Q2 FY10

Q4 FY11

Q1 FY09

Q2 FY09

Q1 FY10

Q3 FY10

Q4 FY10

Q1 FY11

Q2 FY11

Q3 FY11

1QFY12

- 10 .0 % Depo s its Gr o w th ( % ) A dv anc es Gr ow th ( % )

Tren d in CASA
11.5% 11.0% 10.5% 10.0% 9.5% 9.0% 8.5% 8.0%

Break-u p of othe r income

250 . 0 0 200 . 0 0 150 . 0 0

Q3 FY10

Q2 FY11

100 . 0 0 50 . 0 0 0. 0 0

Q4 FY10

Q4 FY11

Q2 FY10

Q1 FY11

Q1 FY09

Q2 FY09

Q3 FY09

Q4 FY09

Q1 FY10

Q2 FY10

Q3 FY10

Q4 FY10

Q1 FY11

Q2 FY11

Q3 FY11

Q4 FY11

1QFY12

2QFY12

Q1 FY10

F in a n c ia l M a r k e t T r a n s a c t io n a l B a n k in g

F in a n c ia l A d v is o r y R e ta il F e e s

Q3 FY11

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Octobe r 20, 2011

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1QFY12

2QFY12

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2QFY12

Financials
Profi t & Loss statemen t Particulars Net interes t income Non-interes t income Net tota l income Operatin g expense s Pre-provisionin g profi t Provision & contingenc y PBT Tax PAT Balanc e shee t Particulars Liabilities Networth Deposits Borrowings Other liabilities & provisions Total liabilities Assets Cash & balances with RBI 1278 1995 678 10210 22193 115 1191 36384 3076 420 18829 34364 132 2186 59008 4980 1556 21538 45704 160 5032 78969 6773 1693 28360 60786 250 7133 104995 FY09 1624 16169 2189 2918 22901 FY10 3091 26799 2564 3817 36384 FY11 3795 45939 3333 5941 59008 FY12E 5862 62247 5602 5257 78969 FY09 511 435 946 419 528 62 466 162 304 FY10 788 577 1365 500 865 137 728 249 479 FY11 1247 623 1870 680 1190 98 1092 365 727 FY12E 1621 917 2537 932 1606 166 1440 475 965 (Rs cr) FY13E 2116 1144 3259 1273 1987 223 1764 589 1175 (Rs cr) FY13E 6898 84656 7619 5821 104995 Key ratios Particulars Per shar e data EPS (Fully diluted) DPS BV ABV Spread s (%) Yield on advances Cost of deposit s Net interes t margins Ope ratin g ratio s (%) Credit to deposit Cost to income CASA Non interes t income/ Total income Retur n ratio s (%) RoE RoA Assets/Equity Asset qualit y ratio s (%) Gross NPA Net NPA Provision coverag e Growt h ratio s (%) Net interes t income PPP PAT Advances Deposits Valuatio n ratio s (%) P/E
The autho r doesn t hold any investmen t in any of the companies mentione d in the article.

FY09 10.2 54.7 53.3 13.7 8.3 2.7 76.7 44.2 8.7 46.0

FY10 14.1 1.5 91.0 90.6 10.3 5.8 2.8 82.8 36.7 10.5 42.3

FY11 20.9 2.5 109.3 109.1 10.6 6.3 2.7 74.8 36.3 10.3 33.3

FY12E 25.3 2.5 153.5 152.5 10.9 6.6 2.5 73.4 36.7 12.7 36.1

FY13E 30.8 3.1 180.6 179.5 11.0 6.5 2.5 71.8 39.0 14.6 35.1

20.6 1.5 13.6 0.7 0.3 51.5 51.8 50.6 51.9 31.5 21.8 27.8 5.2 5.3

20.3 1.6 12.6 0.3 0.1 78.4 54.1 63.8 57.6 78.9 65.7 20.2 3.1 3.1

21.1 1.5 13.9 0.2 0.0 88.6 58.2 37.7 51.8 54.8 71.4 13.6 2.6 2.6

20.0 1.4 14.3 0.4 0.1 81.6 30.0 34.9 32.7 33.0 35.5 11.3 1.9 1.9

18.4 1.3 14.4 0.4 0.1 82.3 30.5 23.7 21.7 33.0 36.0 9.3 1.6 1.6

Balances with banks 645 & money at call Investments Advances Fixed assets Other assets Total assets 7117 12403 131 1327 22901

P/BV P/ABV

Disclaimer This document has been prepared by Sharekhan Ltd.(SHAREKHAN) This Document is subject to changes without prior notice and is intended only for the person or entity to which it is addressed to and may contain confidential and/or privileged material and is not for any type of circulation. Any revie w, retransmission, or any other use is prohibited. Kindly note that this document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Though disseminated to all the customers simultaneousl y, not all customers may receive this report at the same time. SH A R EK H A N will not treat recipients as customers by virtue of their receiving this report. The information contained herein is from publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, SH AREKHAN its subsidiaries and , associated companies, their directors and employees (SHA REK HAN and affiliates) are under no obligation to update or keep the information current. Also, there may be regulator y, compliance, or other reasons that may prevent SH AR E KH A N affiliates from doing so. We do not represent that information contained herein is accurate or complete and it should not be relied upon as such. This document is prepared for assistance only and is not intended to be and and must not alone betaken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involv ed), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. We do not undertake to advise you as to any change of our views. Affiliates of Sharekhan may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any localit y, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject SH AR E KH A N affiliates to any registration or licensing requ irement within such jurisdiction. The securities described herein may or may not be eligible for sale in and all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. SH AR E KH A N affiliates may have used the information set forth herein before publication and may have positions in, may from time to time purchase or sell or may be materially interested in any of the securities mentioned or & related securities. SHA R EK H AN may from time to time solicit from, or perform investment banking, or other services for, any company mentioned herein. Without limiting any of the foregoing, in no event shall SHA REK HA N, of its any affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. Any comments or statements made herein are those of the analyst and do not necessarily reflect those of SHAREKHAN.

Sharekhan

26

Septembe r 21, 2011

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