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MOSL: YES BANK (Buy)-Loan growth accelerates further; asset quality largely stable

YES BANK: Loan growth accelerates further; asset quality largely stable

(YES IN, Mkt Cap USD11.9b, CMP INR340, TP INR410, 21% Upside, Buy)

 

• YES reported robust PPoP growth of 38% YoY/5% QoQ to INR20.02b (2.5% beat), led by strong overall revenue growth of 32% YoY and controlled opex. However, higher provisions of INR4.21b – partly led by INR1b requirement toward NCLT-referred assets – led to lower 22% YoY growth in net profit.
• Advances growth accelerated to 46% YoY at INR1.71t, while deposits grew 30% YoY to INR1.72t. CASA deposits maintained strong traction, growing by 48% YoY, and thus, resulting in an 80bp QoQ increase in CASA mix to 38% (470bp improvement over FY18YTD).
• Margin shrunk 20bp QoQ to 3.5%, led by (i) INR15b/INR54.15b of Tier-2/AT-1 bond raising and (ii) sale of a standard account to ARC, which led to an INR4.2b increase in SR portfolio. However, management guided to achieve 4% margin by FY20. Core cost-income ratio declined 143bp QoQ (employee count declined by 1,656, while the bank opened only 10 branches), and management guided for a 37-38% C/I ratio in the medium term.
• GNPLs increased by 9% QoQ, but the GNPL ratio improved by 10bp QoQ. PCR ratio improved 339bp QoQ to 46.7%, and the bank guided for PCR of 60% by Sep’18E. Gross slippages stood at INR4.95b, which include slippages of INR2.45b from SDR/5:25/NCLT accounts. Sensitive sector exposure declined by 160bp QoQ to 7.7%, led by a reduction in telecom exposure. YES has total exposure of INR13.4b (9 borrowers) toward two NCLT lists.