Maintain outperform on YES Bank with a target price of R863 per share. With growth outlook improving and likely expansion in NIMs (20 bps for FY16), we expect the bank to deliver 24% EPS CAGR and 20% ROE, at 13x earnings.
Expansion in branch network continues at an accelerated pace (150-plus branches per year) and this is aiding the increase in the share of retail deposits as well (~44% as of Q3FY15; in Q3, savings deposits +43% y-o-y, bulk deposits share down 5% q-o-q). The share of retail deposits would continue to go up by a few percentage points per year. Increasing diversification of businesses on both asset and liability sides is a positive. Profitability has stayed strong (ROAs to 1.8%), as the bank continued to invest in liability franchise build-up.
Yes Bank saw pick-up in customer asset growth in the last quarter (23% y-o-y for Q3FY15 versus 17% as of Q2FY15). Management highlighted that the outlook for corporate loan growth is improving as well, as competitive intensity in the segment has gone down and pricing pressure has eased as well. While overall demand from corporate remains weak, management appeared confident of sustaining current levels of corporate loan growth through market share gains. Retail platform is also stabilising now and has started to contribute meaningfully to the growth.