Friday, March 2, 2012



YES BANK has been earning quiet admiration from Investors, Bankers and media as one of the FASTEST GROWING BANKS in India.

It has set for itself Blistering Pace, wanting to grow double every 5 years. And, its performance so far has not been a disappointment at all.

It is one Bank for which there is usually no dearth of Quality Information - to judge its current performance.

It has made a presentation on Feb,7th ,2012 on the Opportunities from Recent Path-Breaking Regulatory Changes, at the Edelweiss Conference.

Following are some of the High lights of this presentation :

FY 06 to FY 10 : CAGR :

Ø Advances & Deposits :74%
Ø Net Interest Income :74%
Ø Non-Interest Income : 55%
Ø Net Profit :71%
Ø Shareholders’ Funds : 53%

Verson 2.0 – Key Parameters 2010-2015 (5 years)

Ø No. Of Employees ; 12,000
Ø No.Of  Branches :750
Ø No. Of ATMs : 3000
Ø Advances :Rs.1,000 bn
Ø Deposit Base : Rs.1,250 bn
Ø Balance sheet – Rs.1,500 bn
Ø Target ROE : 22-24%
Ø Target ROA :1.5 – 1.75%

Diversification – Liabilities Management:
(FY 10 > Q3 FY 12 > FY 15)

Ø  FY 10 : Rs.268 bn; -> (at 38%CAGR)Q3 FY 12 : Rs.469.5 bn;  -> (at ReqdCAGR:35%) FY 15 : Rs.1250 bn;
Ø  CASA :10% -> 13% ->30%
Ø  CD (Cert.Of Deposit) : 17%->12%->8%
Ø  RD(Relationship Corporate Deposits) : 62% ->58% - > 26%
Ø  Br.Term deposits : 1100 ->1800 ->3600
Ø  Overall 2010-2015 Growth Rate of 36%

Currently -

CASA + Branch TDs up from 22% as of Mar,2010 to 31% in Dec,2011.

CDs brought down from 17% to 12% - same period

Savings Account Deposits have grown @90% CAGR and CA Deposits @46% CAGR over 7 quarters.

Some Banking Reforms which can be advantageously used :

Ø De-regulation of Savings rate
Ø De-regulation of NR Rates
Ø Bank Branch Authorization
Ø Govt – Agency Business Management

Yes Bank sees High Opportunity in all the  areas

Currently, Large PSU banks hold a Market share of 49% of deposits (with 28% SA; and Approx NIM impact of 56 bps).

Large PVT sector Banks hold 12% share of Deposits (with 27% SA; and 54 bps NIM impact)

Large Fgn Banks hold a Mkt share of 5% ((SA 21%; NIM impact 42 bps).

By 1% of reduction in SA Ratio of large banks, Mid sized PVT Banks can have the opportunity of Rs.350 bn. Yes Bank sees High opportunity here – without disrupting large Players

Strategy for 2012-13:

Ø Rapid Branch Expansion
Ø B2B2C to be complemented by B2C
Ø Corporate Salary Accounts
Ø Yes First (OPDT) strategy
Ø NRI Banking strategy
Ø Salary Act offering 2 Defence personnel
Ø Gold Distribution / Prepaid Cards


Ø 40% increase in SA balance in just 2 months post SA deregulation
Ø SA account acquisition rate increase by 4X between Oct to Jan 2012
Ø 4X growth seen in NRI SA acquisition since Oct,2011

Diversification of Advances :

FY10 :Rs.221.9 bn: Loans -32%CAGR;C. Asset -45% CAGR; - >Q3 FY 12 Rs.358.7bn; -> FY 15 :Rs.1000 bn; Reqd CAGR 37%;Reqd C Asset CAGR – 29%

Branch Banking (SME + Retail) mix improved from 5% in FY 2010 to 15% in Q3 FY 2012;

Introduction of Retail Products - in Q3 FY 12

Ø Auto Loan
Ø Commercial Loan Financing
Ø Home Loan in partnership with a leading Hsg Fin Company
Ø Inventory Funding/ Small Business loans
Ø Loan against Property
Ø Loan against shares

YES BANK  and Rana Kapoor, its founder, MD & CEO have been featured prominently in Business India in its latest issue dated 19,Feb,2012.

Rana Kapoor calls it the Professionals’ Bank. Yes Bank was the last Bank to get a banking licence 7 years ago – but has grown faster than most others during this period.

Yes Bank’s logo of ‘tick mark for approval’  and a potted money plant creeping up this logo  and a Cheetah statue are common features at Most of the Desks at his HQs in Mumbai.

Rana Kapoor ,54, says- the message to his institution is on agility to build scale.

Ø Today, Yes Bank has a B/S of Rs.71,109 Cr deposits of 46,9292 cr; and loans of Rs.35,868 cr, with NPAs of less than 0.20 % of loans
Ø Its market cap of Rs.11,538 cr ,compares favourably with older lenders like IndusInd Bank (Rs.13,754 Cr) and Federal Bank (Rs.6894 cr).
Ø In its second 5 year run named, version 2.0,  the bank aims to grow to a B/S size of Rs.1,50,000 Cr, with loans of Rs.1,00,000 cr and deposits size of Rs.1,25,000 cr.
Ø It is aiming for doubling No.of Branches  to Rs.750; access more CASA funds; to market more financial products for fee income and an increasing  pool of float money.

It has added 1084 employees  and doubled its branches in last 18 months.

To achieve its targets – it has to grow at 30 - 35% p.a. for next 3 years. The average age of its employees is less than 29. And 83% employees are less than 30; and half of its employees are MBAs.

Retail so far has been  Yes Bank’s weakest link.

More than 63% loans went to large companies; 22% to midsized companies and 15% to Individuals and SMEs.

As Branches increase, Yes Bank hopes to improve its presence in Retail in a big way.

Yes Bank wants to be the Best quality Bank in India, even after growing in size.

As and when RBI starts lowering its interest rate regime, all Banks will benefit and Growth in all sectors will have a pick up – with lesser NPAs, by and large.

Yes Bank too will benefit – and may reach its targets much sooner.

Basic EPS on (FV of Rs.10) during the last 5 Qtrs was Rs.7.23; Rs.6.73’ Rs.6.21: Rs.5.86 and Rs.5.52, which is a 31% growth in EPS YoY.

But, the share Price has not seen similar growth during this period.

On 5th Nov,2010, the share price was hovering around Rs.379 – but is now around Rs.350 – despite its 31% growth in the last 5 quarters.

Annualizing the latest Q3 FY 12 EPS, we get (Rs.7.23 x 4 = ) Rs.29 p.a. At current prices, it is commanding a PE ratio of  just 12. This leaves good scope for appreciation in medium / long term. Factoring in the likely growth in coming quarters, Yes Bank looks a very attractive proposition – specially for medium to long term Investors.

In 2012 – we are likely to see the scenario of Banking sector growing faster than 2011 and becoming a Growth Engine for all other sectors – assuming that RBI wakes up to its task of supporting Growth by reducing the current High Interest Regime - as quickly as it raised the rates in 2011 for containing Inflation. 

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