- Yes Bank's customer assets (loans + credit substitutes) growth was modest at 14.4% yoy. The sharp moderation in growth since the start of year is attributable to flattish credit substitutes (A+ to AAA rated CPs/Bonds) portfolio. This in turn was driven by high volatility in interest rates and the bank pursuing selective credit opportunities. Loan book expanded by 5% qoq and the annual growth rate improved to 15% from 14% in the previous quarter. As per the bank, growth in retail/SME credit has been robust while growth in mid-corporate segment has been moderating. This was reflected in Commercial Banking share in customer assets declining 100bps qoq to 14.7%.
- With just 0.7% increase in deposits, the yoy growth declined to 21%. Mix continued to improve CASA share improving to 21%, up 50bps qoq and 260bps yoy. Savings balances grew at robust pace driven by substantial network expansion and higher savings rate offered. Savings deposits now comprise more than 50% of CASA balance. The share of retail FDs stood stable at 21.2% and represented a strong 32% yoy growth. Therefore, granularity in deposits further increased during the quarter in-line with the stated strategy. Wholesale deposits above Rs250mn constituted 32% of total deposits.
- NIM was stable at 2.9% v/s our expectation of 10bps contraction. Gross lending yield improved by 20bps aided by upward re-pricing on fresh loans and renewals. Funding cost inched up by 10bps qoq impacted by the spike in wholesale rates witnessed during Q2 FY14. NIM outlook is strong as softening of bulk deposits rates and sustained improvement in CASA ratio should lower overall cost of funds. Further, the planned capital raising (up to US$500mn) will push margin higher on the back of reduction in leverage. We NIM to improve by 15bps and 10bps in FY15 and FY16 respectively.
- Core fee growth (ex-treasury) was modest at 16% yoy with slowing traction in Financial Advisory (flat yoy) while Transaction Banking (37% yoy) and Branch Banking (42% yoy) fees grew at brisk pace. There was an uptick in opex growth from 28% yoy to 31% yoy largely attributable to fees related to money raised in the international market. Core cost/income ratio deteriorated to 45%.
- Gross NPLs increased sharply by 48% qoq on the back of higher slippages of Rs1.4bn (implied annualized delinquency ratio of 1.2%) and consequently there was 11bps qoq uptick in GNPL ratio. Annualized credit cost was 55bps which included counter-cylical provisioning of Rs170mn. Cumulative counter-cylical buffer stood at 0.4% of loans as at the end of the quarter. Net NPL ratio doubled on a negligible base to 0.08% in part driven by decline in PCR to 78%. With bond yields softening a bit, bank reversed provision of Rs520mn out of the Rs1.1bn provisioning done in the previous quarter towards MTM depreciation in AFS/HFT investments.
- We upgrade FY14/15 earnings estimates on the back of profit beat delivered in Q3 FY14 and factoring a better NIM outlook. Despite building higher provisioning in FY14/15/16, we forecast Yes Bank's to deliver higher average RoA of 1.6% over FY13-16 as against 1.5% over FY12-14. Earnings growth is estimated to be reasonably strong at 24% pa over FY13-16 driven by margin expansion. Given inexpensive valuation at 1.1x FY16 P/ABV, we retain BUY rating on the stock with 9-month target to Rs433.
|(Rs mn)||Q3 FY14||Q2 FY14||% qoq||Q3 FY13||% yoy|
|Total Interest Income||25,141||25,013||0.5||21,336||17.8|
|Net Interest Income||6,654||6,721||(1.0)||5,843||13.9|
|(Rs bn)||Q2 FY14||Q1 FY14||% qoq||Q2 FY13||% yoy|