Yes Bank Q3FY12 Earnings Review

On January 24, 2012, Yes Bank, one of the emerging private sector banks, posted its Q3FY12 numbers. We at DSIJ have analysed the financials of the bank and also attended the conference call which was scheduled by the management yesterday itself. Overall it was a decent performance from the bank and the scrip rallied at 4 per cent Tuesday while today it is trading marginally down 0.95 per cent to Rs 324.75. 

In Q3FY12, the net interest margin (NIM) of the bank remained stable at 2.8 per cent on a YoY basis while it contracted by 10 basis points when compared sequentially. One of the reasons behind it was the saving interest rate which the bank was the first one to deregulate. As on December 31, 2011 the advances of the bank have increased by 15.3 per cent to Rs 35,867.8 crore. Of the total advances, large corporates account for 63.4 per cent of the advances while mid-sized companies and branch banking account for 21.4 per cent and 15.2 per cent respectively.

On the other hand the total deposits of the bank grew by 19 per cent to Rs 46,929 crore. Of this the CASA grew by 46.5 per cent to Rs 5,913 crore. One should note that of this CASA the SA (savings account deposit) grew by 99.2 per cent on a YoY basis and 40 per cent on a QoQ basis. The bank has continuously been focusing on the retail segment and is putting in maximum efforts for the segment to grow. It has introduced retail asset products like loan against shares, loan against property, home loans (in partnership with Dewan Housing Finance), etc. On the retail liability side, for attracting deposits it has deregulated the saving rates for NRIs and the bank expects a good amount of inflows. The bank targets CASA to 30 per cent of the total deposits by 2015.

It is very commendable that even in a rising interest rate environment the bank’s asset quality has improved. Its gross NPAs decreased by 0.03 basis points to 0.20 per cent while its net NPAs contracted by 0.02 basis points to 0.04 per cent. The capital adequacy ratio (CAR) of the bank stood at 16.13 per cent with Tier 1 CAR at 9.2 per cent. In Q3FY12 the bank raised its Lower Tier 2 capital of Rs 243 crore from insurance companies, corporates, etc.

Yes Bank’s present key operation is wholesale banking and the segment continues to perform well. The revenue from the same increased by 40 per cent to Rs 1,241 crore while profit from the same increased by 45 per cent to Rs 198 crore. On the retail segment it has made losses as the bank has opened new branches and the break-even for the same will take some time. During Q3FY12 the bank added 26 new branches and its employee strength crossed 5,000 as on December 31, 2011.

According to the management, the bank will not face asset liability mismatch in the short run as the cooling off of the saving interest will gradually be visible over a period of 12 to 15 months. Unlike other banks, Yes Bank’s saving account balance contributes in small proportion to the total deposits and hence it is in a comfortable situation. We believe that the bank is in a decent shape and has huge expansion plans. One can invest in the scrip in a staggering manner with a long-term horizon to garner better returns.