EUR 120.00 For Business Accounts Only

MOSL: YES BANK (Buy)-Uncertainties receding-expect gradual pick-up in operating performance

Yes Bank: Uncertainties receding; expect gradual pick-up in operating performance

(YES IN, Mkt Cap USD7b, CMP INR214, TP INR270, 26% Upside, Buy)

 

• Weak other income drags earnings: Yes Bank's (YES) PAT declined 7% YoY to INR10.0b in 3QFY19, as lower corporate banking fees and treasury losses of INR1.6b led to a 37% YoY decline in other income. NII grew 41% YoY to INR26.7b (in-line), driven by strong retail loan growth (+83% YoY) and stable margins (at 3.3%). For 9MFY19, the bank's PAT stood at INR32.3b.
• Healthy write-backs led to lower provisions of INR5.5b (+31%/-41% YoY/QoQ). YES reported write-back of (a) INR2.1b on treasury portfolio and (b) INR351m on other provisions. On the IL&FS exposure, the bank made 25% provision (INR4.8b) on its slipped exposure of INR19.1b and 15% provision (INR925m) on its residual standard exposure of INR6.16b.
• Loan growth moderates; CASA mix down to 33.3%: Loan growth moderated to 42% YoY (+2% QoQ) in the quarter. Deposit growth, too, was restricted to 30% YoY (flattish QoQ) due to a reduction in CDs and a decline in government SA balance. CASA deposits grew 13.5% YoY, while the CASA ratio declined to 33.3%.
• Asset quality deteriorates with downgrade of ILFS exposure; coverage ratio declines: Fresh slippages increased 41% YoY to INR23b, as YES downgraded ILFS exposure, which drove a 33% QoQ increase in GNPLs to INR51.6b (2.1%). Net NPLs increased 42% QoQ to INR28.8b, while PCR declined 352bp QoQ to 44.2%. O/s SMA-2 stood at 0.19% of loans.
• Other highlights: (a) CET-1 ratio improved to 9.1% (+10bp QoQ). (b) RBI approved the appointment of Mr Ravneet Gill as MD & CEO. (c) The bank appointed two additional independent directors and recommended appointment of Mr Ashish Agarwal as executive director (subject to RBI approval). (d) A board meeting is scheduled on 29th Jan'19 to finalize the interim transition.