Hold YES BANK; target of Rs 345: Unicon Investment

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Hold YES BANK; target of Rs 345: Unicon Investment

Unicon Investment has recommended hold rating on YES BANK with a target of Rs 345, in its January 25, 2012 research report.

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Unicon Investment has recommended hold rating on YES BANK with a target of Rs 345, in its January 25, 2012 research report.

"YES Bank Ltd (YES) delivered another strong quarter result, with net profit increasing by 33% YoY to INR 2541 Mn (inline with our estimates). This was contributed by 32% growth in net interest income (INR 4.2 bn) & 31% growth in non interest income (INR 2.11 Bn) on YoY basis. Growth in the non interest income was led by transaction banking (INR 639 Mn), financial advisory (INR 806 Mn), financial markets (INR 483 Mn) and branch banking fees & others (INR 187 Mn). The deposits registered a growth of 19% to INR 469 bn on YoY basis. Due to increase in saving rate (post deregulation), current and savings account (CASA) deposits grew by 47% to INR 59.13 bn taking the CASA ratio to 12.6% up from 11% last quarter. Branch Banking Liabilities (CASA + Branch Banking term deposits) improved from 23.7% of total deposits in Q3FY11 to 30.7% in Q3FY12. Along with this the advance portfolio increased by 15% to INR 358 bn."

"Overall composition of loans changed marginally towards large corporate and institutional clients during the quarter. Corporate & institutional banking (large corporates), commercial banking (mid-sized corporates) & branch banking (SME & retail) accounted for 63.4%, 21.4% & 15.2% respectively of the total loan book. On YoY basis, margins remained at 2.8%; however on sequential basis there was a decrease of 10 bps due to higher cost of funds. In Q3FY12, the bank opened 26 branches, taking the network to 331 & total employee base to 5,013 up 24% YoY. This will help in improving its retail franchise. During the quarter, the bank's asset quality improved further with gross and net NPA ratios at 0.20% and 0.04% (0.23% and 0.06% in Q3FY11), respectively. The bank's provision coverage ratio improved further to 80% in Q3FY12 from 76% in Q3FY11. Bank was able to maintain healthy return ratios of RoA at 1.5% & RoE at 23% YoY. Capital adequacy ratio remained healthy at 16.1% and Tier I capital at 9.2%."

"YES Bank has been able to register strong business growth, profitability with stable margins & strong asset quality. Additionally the bank is expanding its branch network every year, which would help to improve its CASA ratio to 17% in FY13E. We remain positive on long term prospects of the bank. At the CMP stock trades at 2.2x of its FY13E book value. We maintain HOLD rating on the stock for target price of INR 345," says Unicon Investment research report.

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment