IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, recommends ‘Reduce’ on Yes Bank
The Bank (YBL) reported robust growth in 3QFY12 net profit (33% increase YoY) to Rs2.5bn. The strong performance was driven by lower-than-expected provisions for risk, IIFL said.
The brokerage said, “As expected, YBL showed significant traction in CASA deposit growth post de-regulation of interest rate on savings deposits. Viewed in the context of rise in total liabilities, CASA deposit ratio was still muted. We believe the strengthening liability franchise is a key re-rating driver for YBL. However, acquisition of CASA deposits at higher funding cost is unlikely to yield upside to NIM and hence earnings growth”.
Report said, Revenue growth remained robust, driven by strong growth in NII and non-interest income. However, higher operating cost negated the strong upside from revenue growth.
Provision for risk was lower than expected mainly due to reversal of MTM losses on investments during 3QFY12. But for this, net profit growth would have been in line with our expectation, added report.
The report was published by IIFL’s Institutional Equities Research desk.