YES Bank reported decent set of numbers for the September 2012 quarter, meeting the street expectations on all three fronts, namely, top-line and bottom-line growth as well as on net interest margins (NIMs). The mid-sized bank has been focussing on improving its current and savings account (CASA) deposits through aggressive offerings on its savings accounts - a strategy which will aid its margins going forward.
In the quarter gone by, its CASA ratio grew by a strong 100 basis points sequentially to 17.3% on the back of strong traction in its Savings accounts deposits. Notably, the bank has improved this metric consistently for the past seven quarters now expanding it to 17.3% from 10.2% in the December 2010 quarter. As against analysts' expectations of higher gross non-performing assets (GNPAs), the bank managed to reduce the metric marginally (4 basis points sequentially). Further, no new additions in the restructured loans book (unchanged sequentially at 0.46%) also indicates that the bank is managing its asset quality reasonably well.
Not surprisingly, the stock rallied by a strong 2.08% post its results announcement at 11.00 am on Tuesday, as against a flattish Sensex. At 2 times FY13 estimated book value, the stock is trading in line with its historical averages. Most analysts remain bullish on the bank and expect it to clock in 15-20% upsides from current levels
"We expect earnings CAGR of 25% over FY12-14 for Yes Bank. Yes Bank's Return on Assets and Return on Equity ratios are expected to be strong at 1.5% and over 23% respectively.In an easy liquidity environment, the stock can see further re-rating from current levels" , believe analysts at Motilal Oswal Securities.
Loans, deposits growth on track
YES Bank's loan book grew by 22.9% in the quarter gone by - its highest since the June 2011 quarter. Consequently, the net interest income expanded by a strong 35.9% y-o-y to Rs 524 crore. Its non interest income growth too came in at a healthy 29.3% to Rs 277 crore. The bank's NIMs remained unchanged over the previous year at 2.9% and improved by 10 basis points sequentially, driven by expansion in low-cost CASA deposits. The Bank which is largely dependent on wholesale borrowing and is likely to gain significantly from lowering interest rates and improving liquidity. Both these factors will act as key margin levers for Yes Bank going forward, believe analysts. Yes Bank's deposits too grew by a strong 18.6% on a y-o-y basis. Its asset quality improved on a sequential basis as both Gross and net NPA ratios fell marginally to 0.24% and 0.05%. The bank's specific provisioning cover was at 80.4% as on September 30, 2012.
YES Bank's Tier I capital stood at 9.5% and total Capital to Risk Weighted Asset Ratio (CRAR) stood at 17.5% as at September 30, 2012. Rana Kapoor, Managing Director & CEO, Yes Bank said in the results release, “This quarter has once again demonstrated a stable financial performance through a meaningful contribution from all revenue streams, strong asset quality and sustained growth momentum. With the branch network crossing 400 and the launch of new products, and the Bank expects to continue this momentum to achieve further granularity in liabilities and assets. Given the recent reforms announced by the Government, there are initial signs of improvement in the macro-economic environment. The Bank is agile enough to capitalize on the growth opportunities and is well capitalized to capture the same.”