Hold YES BANK; target of Rs 342: Nirmal Bang

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Hold YES BANK; target of Rs 342: Nirmal Bang

Nirmal Bang has recommended hold rating on YES BANK with a target of Rs 342, in its January 24, 2012 research report.

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Nirmal Bang has recommended hold rating on YES BANK with a target of Rs 342, in its January 24, 2012 research report.

"Yes Bank's performance for Q3FY12 was marginally above our estimates. The bank reported a net profit of Rs.254 crs in Q2FY12 resulting in a growth of 33.0% on a YoY basis and a QoQ increase of 8.8% resulting from lower provisioning."

"Yes Bank loan book grew at 15.3% YoY and 4.9% on a QoQ basis in Q3FY12. Out of the total advances portfolio, Corporate & Institutional Banking accounted for 63.4%, Commercial banking accounted for 21.4% and Branch Banking accounted for 15.2%. We have factored in loan growth of 17.7% and 30.6% for FY12E and FY13E respectively. The bank's CASA deposits showed improvement and increased by 46.5% YoY on absolute basis and 22.2% on QoQ basis. CASA as a % of total deposits increased from 11.0% in Q2FY12 to 12.6% in Q3FY12. We expect CASA ratio to be at 12.7% for FY12E and 14.0% for FY13E respectively. Interest earned increased by 17.1% on sequential basis resulting from higher base rate. However, higher cost of funds resulting from higher cost of deposits (+19.3% QoQ) impacted the NIMs of the bank. We expect NIMs to be at 2.6% for FY12E and then marginally improve to 2.7% for FY13E. Non Interest Income grew 30.8% to Rs 211.4 crs in Q3FY12 resulting from growth in Transaction Banking, Financial Advisory and Financial markets. However, on sequential basis, non interest income remained flat."

"Yes Bank has shown consistent performance and has been able to maintain its NIMs. Moreover, the bank is on track with its plans to expand in the retail and SME segment. The bank has also continued its focus on non interest income and has maintained superior profitability and return ratios (RoA of 1.5% for last 13 quarters and RoE at approximately 20% for the same period). At the current price of Rs. 320, Yes Bank is trading at a PE of 12.15x of FY12E EPS & 9.6x of FY13E EPS and at an adjusted P/BV of 2.4x and 1.95x of FY12E & FY13E Adj BV respectively. We have a target price of Rs 342 on the stock. We believe that the upside is limited in near term and partial profit may be booked at current levels. However, long term outlook continues to remain positive," says Nirmal Bang research report. 

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To read the full report click on the attachment