BofA-ML estimates a near doubling of EPS between FY15-18E (CAGR of ~24%), driven by faster growth in loans, maximum margin expansion across banks and granularity in fee income
Yes Bank recently reported 4Q earnings of Rs5.5bn, yoy growth of 28% and a 2% beat. Loan growth remains strong, at 35%+ yoy. Margins rose 20bps yoy (flat qoq). Low-cost deposits (CASA) grew by 29% yoy (13% qoq), within which savings grew by 35% yoy (15% qoq); CASA share in deposits, at 23%, was up ~50bp qoq. Finally, other income grew by 33% yoy; core fees grew at 20%+, with the share of branch / retail at 45%.
Following is an extract of the BofA-ML report on Yes Bank:
While Yes Bank reported that headline gross/net NPL rose by 12/25% qoq, new slippages came in lower, at Rs520mn vs. Rs690mn. Coverage is high, at 72%, aside from which Yes also has contingent provisions of ~50bp of loans. Maximum concentration (~8% of customer assets) is in the ‘electricity sector’, but all in operating units. Outside of this, the book is well spread out in the range of <2-3%. This provides high comfort on the bank’s asset quality, besides project finance being <4-5% of loan book. New restructuring jumped by Rs2.1bn, to Rs3.8bn, although it is still the lowest vs. the average (50bp of loans). This is due to commissioning date issues in one ~Rs1.5bn road project, which should get up and running in the next few quarters.
BofA-ML estimates a near doubling of EPS between FY15-18E (CAGR of ~24%), driven by faster growth in loans, maximum margin expansion across banks and granularity in fee income. BofA-ML's earnings are 2-3% ahead of consensus. BofA-ML also thinks that the valuation is very attractive, with Yes bank trading at ~2.5x FY16E book and ~2.9x trailing book for ~20-22% RoEs. BofA-ML reiterates Buy rating and raises PO to Rs1,100 (vs. Rs1,050) on the roll-forward, pegging it at ~2.9x 1-year forward (FY17), or ~1.0SD above the cycle average, on increasing comfort about operational earnings delivery and stable asset quality
Yes Bank recently reported 4Q earnings of Rs5.5bn, yoy growth of 28% and a 2% beat. Loan growth remains strong, at 35%+ yoy. Margins rose 20bps yoy (flat qoq). Low-cost deposits (CASA) grew by 29% yoy (13% qoq), within which savings grew by 35% yoy (15% qoq); CASA share in deposits, at 23%, was up ~50bp qoq. Finally, other income grew by 33% yoy; core fees grew at 20%+, with the share of branch / retail at 45%.
Following is an extract of the BofA-ML report on Yes Bank:
While Yes Bank reported that headline gross/net NPL rose by 12/25% qoq, new slippages came in lower, at Rs520mn vs. Rs690mn. Coverage is high, at 72%, aside from which Yes also has contingent provisions of ~50bp of loans. Maximum concentration (~8% of customer assets) is in the ‘electricity sector’, but all in operating units. Outside of this, the book is well spread out in the range of <2-3%. This provides high comfort on the bank’s asset quality, besides project finance being <4-5% of loan book. New restructuring jumped by Rs2.1bn, to Rs3.8bn, although it is still the lowest vs. the average (50bp of loans). This is due to commissioning date issues in one ~Rs1.5bn road project, which should get up and running in the next few quarters.
BofA-ML estimates a near doubling of EPS between FY15-18E (CAGR of ~24%), driven by faster growth in loans, maximum margin expansion across banks and granularity in fee income. BofA-ML's earnings are 2-3% ahead of consensus. BofA-ML also thinks that the valuation is very attractive, with Yes bank trading at ~2.5x FY16E book and ~2.9x trailing book for ~20-22% RoEs. BofA-ML reiterates Buy rating and raises PO to Rs1,100 (vs. Rs1,050) on the roll-forward, pegging it at ~2.9x 1-year forward (FY17), or ~1.0SD above the cycle average, on increasing comfort about operational earnings delivery and stable asset quality
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