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MOSL: YES BANK (Buy)-Strong performance in a challenging quarter

YES BANK: Strong performance in a challenging quarter

(YES IN, Mkt Cap USD12.6b, CMP INR352, TP INR444, 26% Upside, Buy)

 

• YES reported robust PPoP growth of 6.7%/26.3% QoQ/YoY to INR19.57b (in-line; core PPoP growth at 34% YoY, backed by strong core fee income growth of 21% YoY), led by total income growth of 23.4% YoY and controlled opex (+19.4% YoY to INR14.4b). Controlled provisions of INR4.0b (-5% QoQ) led to a 29% YoY increase in PAT to INR11.8b (6% beat).
• Advances growth accelerated to 54% YoY at INR2.04t, while deposits grew 41% YoY to INR2.01t. CASA deposits grew 41% YoY, but the CASA ratio declined sequentially to 36.5% (38% in 3Q) as total deposits grew 16.9% QoQ.
• NIM shrunk 10bp QoQ to 3.4%, led by (i) higher proportion of borrowings as the bank raised INR30b/INR39b of Tier-2 bonds/Medium Term Notes (MTNs), (ii) a sequential drop in CASA share and (iii) increased lending to better-rated corporates. Cost to core income ratio at 42.4% was 30bp below the 3QFY18 levels, even as the bank added 50 branches during the quarter.
• Slippages declined to INR3.8b (1.1% annualized). GNPA/NNPA declined 12%/18% QoQ, with GNPA/NNPA ratios down 44/29bp QoQ to 1.28%/0.64%. PCR improved 340bp QoQ to 50%. Of the total RBI directed divergent amount of INR63.55b, INR26.3b continues to be outstanding standard exposure, while the rest has been either recovered, sold to ARC or classified as NPL.