Hold Yes Bank; target of Rs 750: ICICIDirect

ICICIDirect's research report on Yes BankProfit grew 25.2% YoY to | 676 crore, above our estimate of | 652 crore, led by stronger-than-expected NII growth of 27.4% YoY to | 1157 crore. Strong credit growth at 26.7% YoY to | 84396 crore and margin improvement at 3.4% led to a healthy NII performance Asset quality remained resilient with GNPA increasing 5 bps QoQ at 0.66% (| 559 crore vs. | 491crore QoQ) while NNPA rose to | 187 crore vs. | 159 crore QoQ. The bank neither sold any asset to ARC nor restructured any asset under SDR or 5:25 route. Restructured assets (RA) remained stable at | 568 crore (~0.67% of loans) Other income traction remained strong at 39% YoY to | 746 crore Deposits saw healthy traction at 23.1% YoY to | 101437 crore, moderately higher than our estimate. CASA ratio improved ~110 bps QoQ to 26.6% on the back of robust increase in SA by 64.1% YoY In the past five years, the bank has consistently delivered 1.5%+ RoA and 18%+ RoE, which is estimated to be maintained in FY15-17E. Going ahead, we expect the bank to clock healthy 20% CAGR in PAT and have broadly maintained our estimates. Though asset quality has remained resilient, given the current business environment, probability of higher slippages cannot be completely ruled out. Given the current business environment, we are adopting a conservative stance on valuation. Therefore, we are lowering our target multiple to 2x from 2.2x on FY17E ABV. Consequently, we revise our target price lower to | 750 per share (earlier | 850) and revise our rating from BUY to HOLD. ICICIDirect has recommended hold rating on Yes Bank Ind with a target price of Rs 750 in its research report dated February 1, 2016.

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