Accumulate Yes Bank; target of Rs 1380: Prabhudas Lilladher

Prabhudas Lilladher's research report on Yes Bank

Yes Bank continued to report strong quarter with net earnings growing at 31% YoY to Rs14.46bn (PLe: Rs13.5bn) mainly on back of strong income profile and robust loan growth of 38% YoY. Liability profile continues to improve with CASA at 30% of deposits on back of robust 50% YoY growth. Asset quality saw marginal deterioration but credit cost remained within guidance of 50‐70bps. The bank lowered its credit cost guidance to 50‐60bps for FY17. We have maintained our credit cost assumptions of 60bps and loan growth of 28% for FY17E, while have slightly tweaked estimates on opex front. Capital‐raising remains an impediment to ensue strong b/s growth. We downgrade to ACCUMULATE with PT of Rs 1,380 (from Rs 1,250) based on 2.9x Mar‐18E ABV (earlier at 2.7x) mainly on reduction in Cost of Equity assumption.

Bank’s Tier‐I stands at 10.1% with CET‐I at 9.8% and has consumed overall capital by 50bps QoQ mainly on regulatory requirement & high asset growth. The bank has approval to raise Tier‐I capital of up to US$1bn. Although, we will continue to see robust performance & better operating metrics, capital issuance is likely to remain an overhang. We downgrade to “Accumulate” with increased PT of Rs 1,380 (from Rs 1,250) based on 2.9x Mar‐18E ABV.