Yes Bank reported tepid set of numbers which were marginally below our estimates. While NII grew by 13.1% YoY to INR 7453 mn, profit grew by 9.6% to INR 4395 mn dented largely by 3.7% decline in non interest income and 25.1% surge in operating expenses. Hold

1. 1
BFSI
Yes Bank
Yes Bank reported tepid set of numbers which were marginally below our estimates. While NII grew by 13.1% YoY to
INR 7453 mn, profit grew by 9.6% to INR 4395 mn dented largely by 3.7% decline in non interest income and 25.1% surge in
operating expenses (driven by advertisement expenses of ~INR 230 mn relating to IPL sponsorship). Asset quality continued
to remain robust with PCR of 78.4% and loan impaired ratio of mere 0.52%, which is amongst the best in the industry.
We change our rating from BUY to HOLD on the stock with a target of INR 572.
Corporate banking driving advances
Advances grew by 23.2% to INR 590 bn led by 31.6% surge in
Corporatebankingsegment (contribution+440bpsto68.7%).Retail
bankingsegmentcontributing16.8%alsoclockedagrowthof23.2%
YoY to INR 99 bn. The bank remained cautious in lending to mid-
sized corporate as advances in this segment declined by 4.0%. The
customerassetsgrewby16.4%(<20%forfourthconsecutivequarter)
to INR 713 bn due to slower traction in credit substitute segment,
proportion of which declined by 454 bps to 17.3%. We expect the
loan book to grow at 21.4% CAGR over FY14-16E.
Traction in CASA continues
CASA traction continued with CASA ratio improving by 213 bps to
22.3% driven by 1.4x increase in savings deposits. Additionally
YBL has started focusing on retail CA to drive CA deposits and has
added 200-250 retail CA sales force. Overall deposits grew by
16.6% to INR 761 bn led by 29.0% surge in CASA deposit to INR 170
bn. Increasing traction in savings deposits coupled with increasing
branch penetration and renewed focus towards building retail
liability franchise would aid YBL to improve its CASA ratio by ~1-
1.5% each quarter. We expect deposit to grow at 16.6% CAGR
over FY14-16E driven by 29.9% CAGR in CASA deposits, resulting
CASA ratio of 27.3% in FY16.
NIMs flat at 3.0%
NIMs remained flat at 3.0% as both yields on advances & cost of
funds increased sequentially by 10 bps each to 12.5% & 8.5%
respectively in Q1FY15. We expect NIMs to improve by over 10
bps led by improvement in yields (supported by recent capital
issuance) and moderating cost of funds (on the back of improving
CASA ratio and expected softening in wholesale rates).
Decline in Non-Interest income after 14 quarters
NOI declined by 3.7% (for the first time after 14 quarters) to INR
4256 mn largely owing to one time monetization of bond gains
Shareholding (%) Jun-14
Promoters 22.22
FIIs 45.60
DIIs 20.44
Others 11.74
Relative Prince Performance
July 24, 2014 RESULTUPDATE-Q1FY15
amounting to INR 950 mn amidst favorable debt market
environment in Q1FY14. Transaction banking segment reported a
growth of 59.0% to INR 1402 mn on the back of enhanced cross
selling of products to customers. Retail banking fees segment
grew 43.8% to INR 525 mn albeit on a low base, which is in line
with its strategy of building granularity in fee income. Growth in
Financial advisory segment improved by 37.5% to INR 1975 mn.
Financial Market segment bore the brunt as it declined sharply
by 79.7% owing to INR 450 mn loss on swap position taken in
earlier quarters to protect the investment portfolio against a rise
in interest rates.
Asset quality continues to remain robust
Asset quality remained among the best in the industry with
impaired loan ratio of mere 0.52% largely owing to its stringent
risk management system. Restructured book stood at INR 1131
mn (0.19% of advances). Slippages, recoveries/upgrades and
write-offs stood at INR 1150 mn, INR 820 mn and INR 100 mn
respectively. Strong PCR of 78.1% in addition to countercyclical
buffer of INR 2.4 bn (0.4% of advances) provides comfort of asset
quality front.
Outlook & Valuation
YBL is one of our preferred plays in private banking sector due to
its expanding corporate book, strengthening balance sheet,
diversified fee income and superlative return ratios. Its strategy
of shifting product mix in favour of high yielding segments coupled
with continued traction in CASA deposit mobilization will drive
the growth of YBL. Best asset quality in the industry coupled with
loan impaired ratio of mere 0.52% provides addition comfort.
Recent capital raising in addition to expected economic revival
lends comfort to banks valuation. We change our rating from BUY
to HOLD on the stock with a target of INR 572, which implies 1.79x
FY16E P/ABV.
Key Data
BSE Code 532648
NSE Code YESBANK
Bloomberg Code YES IN
Reuters Code YESB.BO
Shares O/S (mn) 415.20
Face Value 10
Mcap (INR bn) 222.82
52 Week H/L 588.00/216.10
2W Avg. Qty, NSE 3721561
Free Float (INR bn) 173.31
Beta 2.43
Y/E March (INR mn) FY13 FY14 FY15E FY16E
Interest income 82940 99814 113024 133005
Interest Expended 60752 72651 81674 94912
Net interest income 22188 27163 31350 38093
Growth (%) 37.33% 22.42% 15.41% 21.51%
NIM (%) 2.85% 2.91% 3.01% 3.13%
APAT 13007 16178 19720 23369
Growth (%) 33.06% 24.34% 21.89% 18.50%
EPS (INR) 36.28 44.86 47.50 56.28
P/E 11.81 9.22 11.30 9.53
P/ABV 2.65 2.10 1.94 1.68
Net NPA 0.01% 0.05% 0.07% 0.06%
RoA 1.51% 1.55% 1.66% 1.67%
RoE 24.82% 25.03% 21.14% 18.81%
Dividend Yield 1.40% 1.93% 1.68% 2.05%
Sensex: 26147 CMP:INR537 Target: INR 572
Rohit Agarwal
rohit.agarwal@spagroupindia.com
Ph. No. 91 33 40114800/ 839
40
60
80
100
120
140
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Yes Bank Sensex

2. 2
BFSI
Other Highlights
• C/I ratio has deteriorated sequentially by 338 bps to 45.0%
owing to higher advertisement cost relating to IPL sponsorship
amounting to INR 230 mn and muted growth in income.
• Provision during the quarter stood at INR 237 mn. Break-up -
a) INR 400 mn for standard assets - INR 210 mn for general
loss & INR 190 mn for unhedged forex currency exposure as
per RBI guidelines (YBL has assessed clients to unhedged foreign
currency at INR 760 mn overall, which it has spread over four
quarters of FY15. This is however expected to decline as actual
unhedged forex will likely be lower), b) INR 120 mn as counter
cyclical buffer provisions, c) INR 180 mn for NPAs and d) write
back of INR 460 mn of investment depreciation (Rates have
decline in Q1 and hence losses have reversed)
• CAR has improved to 18.0% with Tier I being at 12.6% post
recent capital issuance of $ 500 mn, which will aid in
maintaining growth for next couple of years.
Quarterly Financials
Particulars(INRmn) Q1FY15 Q4FY14 Q3FY14 Q2FY14 Q1FY14 YoY% QoQ%
InterestIncome 26796 25681 25141 25013 23979 11.75% 4.34%
InterestExpenses 19343 18485 18487 18292 17388 11.24% 4.64%
NetInterestIncome 7453 7196 6655 6721 6591 13.08% 3.58%
NetInterestMargin(%) 3.00 3.00 2.90 2.90 3.00 - -
OtherIncome 4256 4455 3879 4461 4421 -3.72% -4.47%
TotalIncome 11710 11651 10533 11182 11012 6.34% 0.50%
TotalOperatingExpenses 5267 4847 4387 4053 4212 25.05% 8.68%
EmployeeExpenses 2247 2038 1941 1853 2012 11.71% 10.25%
Otheroperatingexpenses 3020 2808 2446 2200 2200 37.25% 7.53%
OperatingProfit 6442 6804 6147 7129 6800 -5.25% -5.32%
CosttoIncomeRatio(%) 44.98% 41.60% 41.64% 36.25% 38.25% (673bps) (338bps)
Provisions&Contingencies 237 723 133 1791 970 -75.52% -67.16%
ProvisionforTaxes 1810 1779 1858 1626 1821 -0.61% 1.73%
NetProfit 4395 4302 4156 3711 4008 9.64% 2.15%
EPS 10.60 11.93 11.53 10.30 11.14 -4.90% -11.17%
Equity 4147 3606 3606 3604 3597 15.29% 15.00%
GNPA 1980 1749 1958 1321 1049 88.68% 13.17%
NNPA 428 261 423 194 121 254.39% 64.21%
%GNPA 0.33 0.31 0.39 0.28 0.22 11bps 2bps
%NNPA 0.07 0.05 0.08 0.04 0.03 4bps 2bps
RoA(Annualised) 1.60 1.60 1.60 1.50 1.60 - -
Source:Company, SPA Research
De-regulation proving to be game changer
10.1% 10.4% 11.2%
12.6% 12.5%
20.2% 20.4% 20.9%
22.0% 22.3%
0%
5%
10%
15%
20%
25%
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15
Saving Deposit CASA Ratio
NIMsrecouping back to 3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15
2.8%
2.9%
3.0%
3.1%
CoF YoA NIM
Well-distributed fee franchise
39.3% 40.3%
18.2% 12.1% 8.3%
32.4% 27.8%
42.0%
39.5% 46.4%
8.2% 11.6%
11.4% 12.3%
19.9% 20.3% 28.4% 30.0% 32.9%
18.3%
0%
20%
40%
60%
80%
100%
120%
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15
Financial Markets Financial Advisory
Retail Banking Transaction Banking
Best asset qualityin the industry
0.22
0.28
0.33
0.03 0.04
0.08
0.05 0.07
0.39
0.31
0.00
0.10
0.20
0.30
0.40
0.50
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15
GNPA (%) NNPA (%)

3. 3
BFSI
Financials
Income StatementY
Y/E March (INR mn) FY13 FY14 FY15E FY16E
Interest income 82940 99814 113024 133005
Growth (%) 31.50% 20.34% 13.24% 17.68%
Interest Expended 60752 72651 81674 94912
Net interest income 22188 27163 31350 38093
Growth (%) 37.33% 22.42% 15.41% 21.51%
Other Income 12574 17216 21520 25393
Net Income 34762 44378 52869 63487
Operating Expenditure 13345 17499 20628 24951
Operating Income 21417 26880 32241 38535
Provisions & Contingencies 2160 3617 3453 4169
PBT 19257 23263 28789 34366
Tax 6251 7085 9068 10997
PAT 13007 16178 19720 23369
APAT 13007 16178 19720 23369
Growth (%) 33.06% 24.34% 21.89% 18.50%
EPS (INR) 36.28 44.86 47.50 56.28
Balance Sheet
Y/E March (INR mn) FY13 FY14 FY15E FY16E
SOURCES OF FUNDS
Equity Share Capital 3586 3606 4152 4152
Reserves 54491 67611 111239 128911
Total Shareholders Funds 58077 71217 115391 133063
Total Deposits 669556 741920 851724 1009293
Growth (%) 36.22% 10.81% 14.80% 18.50%
Borrowings 209222 213143 245114 294137
Other Liabilities & Provisions 54187 63878 70265 73779
Total Liabilities 991041 1090158 1282495 1510272
APPLICATION OF FUNDS
Current Assets 40658 58917 95805 123020
Investments 429760 409504 450454 495499
Advances 469996 556330 667596 819807
Growth (%) 23.72% 18.37% 20.00% 22.80%
Fixed Assets 2295 2935 3043 3069
Other Assets 48332 62473 65597 68877
Total Assets 991041 1090158 1282495 1510272
Key Ratios
Y/E March (INR mn) FY13 FY14 FY15E FY16E
Per Share Data (INR)
EPS 36.28 44.86 47.50 56.28
BVPS 161.94 197.48 277.92 320.48
ABVPS 161.75 196.76 276.87 319.26
DPS 6.00 8.00 9.00 11.00
Profitability Ratios
Yield on Advances 12.79% 12.80% 12.82% 12.86%
Cost of Deposits 10.46% 10.29% 10.25% 10.20%
Net Interest Margin 2.85% 2.91% 3.01% 3.13%
RoA 1.51% 1.55% 1.66% 1.67%
RoE 24.82% 25.03% 21.14% 18.81%
Balance Sheet Ratios
Credit/Deposit Ratio 70.20% 74.99% 78.38% 81.23%
Investment/Deposit Ratio 64.19% 55.20% 52.89% 49.09%
CASA Ratio 18.95% 22.03% 25.91% 27.33%
Capital Adequacy Ratio (CAR) 18.30% 14.40%* 17.40% 16.30%
Tier I 9.50% 9.80% 11.30% 10.20%
Aseet Quality Ratios
Gross NPA 0.20% 0.31% 0.39% 0.43%
Net NPA 0.01% 0.05% 0.07% 0.06%
Provision Coverage Ratio 92.60% 85.10% 85.86% 82.43%
Slippage Ratio 0.57% 0.78% 0.85% 0.82%
Efficiency Ratios
Cost to Income Ratio 38.39% 39.43% 39.02% 39.30%
Business per Employee (in INR mn) 177.40 155.80 157.48 154.38
Profit per Employee (in INR mn) 2.10 2.00 2.04 1.97
Valuation Ratios
P/E 11.81 9.22 11.30 9.53
P/ABV 2.65 2.10 1.94 1.68
Dividend Yield 1.40% 1.93% 1.68% 2.05%
*As per Basel III, hence not comparable to previous years

4. 4
BFSI
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