Company: Yes Bank
Recommendation: Strong BUY
There is an opportunity to make some short term trading profits on the Yes Bank counter. The Q3 results are expected to be out today afternoon. As per my projections, it is expected to deliver a Net Profit in the range of Rs. 190 to 200 crore which converts to an EPS of Rs. 5.6 to 5.8 and a Book Value as on date to about Rs. 106-107. Besides, the management is expected to give out their exposure to MFI's which most of the investors are awaiting. Once the bank comes out with a decent set of nos, backed by strong statements on MFI exposure, I expect massive buying coming on the counter. Also, the market is expecting Yes Bank to lose quite a lot on Net Interest Margin. But the fact of the matter is that Yes Bank has increased its PLR and Base Rate atleast 3 times in last 2 quarters, the result impact of which will start from third quarter. One may note that Yes Bank has a low CASA ratio of roughly 10% but it has a strong capability to pass on the increase in its PLR and Base Rate to some 80 -90 % of its borrowers. This makes for a perfect Q3 for Yes Bank.
The only head wind that remains after this is the MFI exposure that the bank has. The respite though is that the MFI exposure of Yes Bank is only about 1% of its advances and is to some extent backed by gold and other securities. The details on this front will be out today. After having followed this management for more than 2 years now, I have a feeling that they will already have prepared a very strong response to address the investors fears.
My detailed projections for the quarter ended Dec 31, 2010 are as follows:
| INCOME STATEMENT | Amt (Cr.) |
| Interest Earned | 1,201 |
| Interest on Advances | 912 |
| Income on Investments | 284 |
| Interest on Balance with RBI and Others | 3 |
| Other Interest Income | 2 |
| Other Income (Non Interest Income) | 155 |
| Transaction Banking | 42 |
| Financial Markets | 25 |
| Financial Advisory | 70 |
| Third Party Distribution and Retail Fees | 18 |
| Total Revenue (1+2) | 1,356 |
| Interest Expended | 863 |
| Borrowings | 116 |
| Deposits | 747 |
| Operating Expenses | 193 |
| Employee Costs | 95 |
| Other Operating Exp | 78 |
| Provisions and Contingencies | 20 |
| Total Expenditure (3+4) | 1,056 |
| Profit Before Tax (I-II) | 300 |
| Tax Expense | 99 |
| Net Profit | 201 |
| Basic EPS | 5.80 |
| Book Value per Share | 106.90 |
| BALANCE SHEET | |
| Share Capital | 347 |
| Reserves & Surplus | 3,358 |
| Deposits | 45,514 |
| Borrowings | 5,270 |
| Other Liabilities & Provisions | 2,749 |
| Total | 57,237 |
| Cash and Balance with RBI | 4,627 |
| Balance with Banks and Money at Call | 1,038 |
| Investments | 16,084 |
| Advances | 33,383 |
| Fixed Assets | 120 |
| Other Assets | 1,985 |
| Total | 57,237 |
| IMPORTANT RATIOS | |
| Gross Yld on Clean Avg Adv (Not Annu) | 2.87% |
| Gross Yld on Clean Avg Adv (Annualised) | 11.48% |
| Gross Yield on Investments (Not Annu) | 1.86% |
| Gross Yield on Investments (Annualised) | 7.43% |
| Interest Cost on FDs (Not Annu) | 1.93% |
| Interest Cost on FDs (Annualised) | 7.73% |
| % Growth in Advances (Q-on-Q) | 13 |
| % of Gross NPA | 0.22% |
| % Net NPA | 0.06% |
| Tax Expense % | 33 |
| OTHER FINANCIAL DATA | |
| Average Advances for the Quarter | 31,865 |
| Average Investments for the Quarter | 15,270 |
| Average FD's for the Quarter | 38,285 |
| Average Borrowings for the Quarter | 5,235 |
| Gross NPA | 75 |
| Net NPA | 19 |
| Net Interest Income (NII) | 338 |
| OTHER NON FINANCIAL DATA | |
| No of Branches | 195 |
| No of Employees | 4,000 |
Disclaimer: I have holdings, trade in, and have derivative positions in Yes Bank. I have also recommended Yes Bank to my friends, relatives and others.
Ankit Shah
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