Add Yes Bank, better placed than peers: Kotak Institutional Equities

By: |
Published: October 31, 2015 12:09:10 AM

Maintain ‘add’ on Yes Bank with a target price of R850 a share, reflecting limited changes to our near-term earnings profile.

Maintain ‘add’ on Yes Bank with a target price of R850 a share, reflecting limited changes to our near-term earnings profile.

At our target, we value the bank at 2.3x book and 13x FY17e book for RoEs in the range of 18% and earnings growth of 15% CAGR. Our positive rating is driven by the improving economic outlook, favourable interest rate environment and focus on diversifying the loan book from the corporate segment.

Yes Bank reported a 27% y-o-y growth in earnings on the back of 27% y-o-y growth in revenues and flat provisions. NII grew 29% y-o-y, while non-interest income grew at a relatively slower level of 22% y-o-y, as the bank saw pressure on growing its fee income from transaction banking and subdued performance in corporate advisory.

NIM was maintained at 3.3%, but there is marginally higher support from interest income from RBI/inter-bank funds, which is probably not a one-off and appears to be a function of the underlying liquidity in the environment.

Loan growth has slowed to 29% y-o-y. Gross NPLs have increased marginally by 15 bps to 0.6% of loans, but the key concern remains the steady rise in gross NPL ratio and declining coverage which currently stands below 70%. Fresh impairments were low at 0.7% of loans and the bank has not undertaken any restructuring of loans this quarter.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition