Monday, 14 January 2013

Incredible Stocks - Yes Bank

There are some good stocks to invest in the banking industry too. In this post we will discuss about one such private sector bank. Since its inception in the year 2005 as a listed entity, this bank has transformed itself from a small-sized to a mid-sized bank.

Yes Bank is a relatively new entrant to the banking sector of India
and within a few years, as the country’s economy grew, Yes Bank has also seen good growth and presently has 400 branches (approx.) across the country. Let’s see if it is a good stock investment option.

In the next 3yrs Yes Bank aims to have a healthy balance sheet of Rs. 1,50,000 Cr, expected deposit base of Rs. 1,25,000Cr and loans/advances of Rs.1,00,000Cr. The bank wants to double its branches in the next 3yrs. The high-level of corporate governance is evident from the steady growth of net profit of 25%-30% and an NPA of 0.05% and consequent lower provisioning. Their portfolio consists of corporate banking to a major extent, but they are spreading their presence to the retail sector too with divers retail banking products to tap the growing consumer segment.

Let’s look at the parameters to get a clearer picture :

2013 2012 2011 2010 2009 CAGR%
Net Interest Margin 2.9 2.6 2.9 3.1 2.8
Net Interest Income (in Cr) 2219 1616 1247 788 511 44.36
Net Profit (in Cr) 1300 976 727 477 303 43.92
Shareholder Equity / Fund (in Cr) 5807.66 4676 3794 3089 1624 37.52
ROE% 22.38 20.87 19.16 15.44 8.62
Balance Sheet Size (in Cr) 99104.13 73662 59007 36382 22900 44.23

The CMP at the time of the post was Rs.507.60

Gross NPA is 0.2%
Net NPA is 0.01%
CASA Ratio is 18.9%

Any bank with a constant and better margin along with growing balance sheet and loans/advances should be able to limit their NPA and CDR and be comfortable with their provisioning coverage even in bad times without denting much of their net profit. Yes Bank maintained its good performance even in the face of last recession which was due to the US sub-prime mortgage crisis leading to the fall of Lehman Brothers and followed by slowdown in India.

The bank has given a return on equity of 11 times to its subscription value.

Yes Bank is growing cautiously and also proactively keeping itself updated to all regulatory requirements. We believe it is a good stock to invest for the long term and our outlook on Yes Bank is stable to bullish.