MOSL: YES BANK (Buy)-Strong op. performance, earnings momentum continue to enthuse

Yes Bank: Strong op. performance, earnings momentum continue to enthuse

(YES IN, Mkt Cap USD12.4b, CMP INR370, TP INR444, 20% Upside, Buy)

• Earnings in line with ~30% YoY growth: YES reported robust PPoP growth of 44%/15% YoY/QoQ to INR24.5b (4% beat), led by strong core fee income growth of 53% YoY and controlled opex (+18% YoY to INR14.6b). PAT grew 30% YoY to INR12.6b, despite elevated provisions of INR6.2b (INR3.8b toward NPA provisioning). YES has availed the RBI's dispensation and will amortize MTM losses of INR2.78b in FY19.
• Loan growth remains robust; CASA mix declines marginally: Business momentum remains strong, with loan growth of 53% YoY (INR2.14t) and deposits growth of 42% YoY (INR2.13t). CASA deposits grew 36% YoY, but the CASA ratio declined to 35.1% (36.5% in 4Q). Margins, thus, shrank 10bp QoQ to 3.3%, also affected by continued de-risking of loan book, as reflected in a 178bp YoY improvement in RWA/total assets.
• Asset quality held largely stable; coverage ratio improves sharply: Fresh slippages increased to INR5.6b (of which INR3.2b are expected to recover by 2Q), driving a 7.5% QoQ increase in absolute GNPLs. Net NPL, however, declined 4% QoQ aided by healthy provisioning, and NNPL ratio thus improved by 5bp QoQ. Coverage ratio improved by 530bp QoQ to 55.3%, and the bank appears on track to reach 60% in FY19 as guided earlier. Net stressed assets have declined to ~1.5% of advances (1.7% in 4QFY18).