Yes Bank - June Quarter 2012 - Result Update

On July 25, Yes Bank posted a good set of June quarter numbers which helped the stock price to react positively. The stock has moved higher by almost 1 per cent over two trading sessions despite the broader markets moving downwards. This is primarily because the bank has displayed a consistently good performance in the past and has continued its momentum this time too. Most of the bank’s parameters are at a comfortable level. Its net interest income (NII) has increased by 33 per cent to Rs 472 crore while the net profit grew by 34 per cent to Rs 290 crore.

Asset quality is an area of concern for most of the banks and in the case of Yes Bank the gross NPA has increased by 11 basis points to 0.28 per cent while its net NPA increased by 5 basis points to 0.05 per cent. The provision of the bank for the June quarter stood at Rs 30 crore as against Rs 1.5 crore seen in a similar period last year. The bank’s provision coverage ratio (PCR) remained almost at the same level of 78.3. In our opinion, the NPA levels of the bank are quite healthy and probably the best in the sector. The bank’s net interest margin (NIM) remained constant at 2.8 per cent, which is commendable. The capital adequacy ratio (CAR) stood at 16.5 per cent with Tier 1 CAR at 9.2 per cent.

Yes Bank achieved decent business growth during this quarter. Its total deposits increased by 15.2 per cent to Rs 50,208 crore while the total advances grew by 16.4 per cent to Rs 38,534 crore. The focus of the bank on the retail segment has been showing some positive signs as can be seen from its current and saving account (CASA) ratio which stood at 16.3 per cent in the June 2012 quarter as against 10.9 per cent during the same period last year. Further, Yes Bank was the first one to deregulate its saving interest rate on the same day when the RBI had given a nod. Its saving bank account fetches a handsome 7 per cent per annum while most of the other banks have let the rate remain at 4 per cent per annum.

The bank’s total loan book now comprises corporate and institutional banking (accounting for 64 per cent of the total loan), commercial banking (20.2 per cent) and branch banking (15.8 per cent). In the June quarter its treasury segment performed well too with revenue increasing by 52 per cent to Rs 724 crore while the profit increased by 60 per cent to Rs 358 crore. However, while there has been revenue growth of 100 per cent to Rs 133 crore in the retail segment, it has posted a loss of Rs 13 crore as against Rs 8 crore during the same period last quarter. This was because of an expansion of its branch network which will require at least 18 to 24 months for breaking even. During the June quarter the bank added 25 branches, taking the total head count to 381 branches as of June 2012.

In conclusion, we at Dalal Street Investment Journal believe that the bank has posted a good set of the June quarter numbers. The bank has ambitious growth plans coupled with a stable margin level and noteworthy asset quality that makes it attractive for the investors. However, it is currently available at a slightly higher valuation with a price to book value of around 2.46 times and hence we would advise our investors and readers to grab the counter in a staggering manner, keeping in mind a medium to long-term perspective to garner better returns.