Buy Yes Bank; target of Rs 1375: Antique Stock Broking

Yes bank continued to deliver robust finacial performance in FY16 with strong loan growth at 30% YoY growth, impressive roll-out of the liability franchise, margin expansion, and stable asset quality. Improving trend in retail banking continues with a) CASA expansion of ~500bps YoY at 28.1%, b) the share of CASA+Retail FD increases to 54.5% (47.9% a year ago) and c) contribution of branch banking on advance side increases to 34.9% vs 32% in FY15. Overall earnings in 4QFY16 reported strong growth of 27% YoY at INR7.0bn on higher other income and NII.

Asset quality of the Yes continues to remain one of the best in the industry, amid regulators simultaneous review of banks asset quality and healthy balance sheet growth, which further highlights its healthy credit appresial standrads. Going forward, we expect earnings to sustain strong growth trajectory with multiple levers like capital infusion, margin expansion on the back of incremental lending towrads high-yielding retail products and improveemnt in CASA ratio and lower credit cost. Management is guiding at 50-70bps of credit cost in FY17e vs 50bps in FY16.

Yes Bank has board approval to raise Tier I capital up to US$1bn (Core Tier?I: 10.3% currently) to support the growth momentum. We believe the bank has made conscious efforts to make its asset and liability franchise granular which will help improve margin profile and keep asset quality stable. We recommend 'BUY' with TP of INR 1,375/share.