“YES intends to strengthen its retail liability franchise and has raised its guidance of overall branch network to 900 branches by FY15 from 750 branches earlier. With rapid branch expansion, differentiated product offerings (6-7% interest rate on SA balances and products like YES Vijay), and leveraging of strong corporate and SME relationships, YES expects to achieve CASA ratio of 30% by FY15 (15% at the end of FY12) and increase the share of retail term deposits to 36% by FY15 as compared to 18% in FY12.”
“Overall loan book guidance remains unchanged at INR1t by FY15, implying a CAGR of ~38% over FY12-15 and 29% if credit substitutes are included. YES also maintained its guidance of increasing its balance sheet size to INR1.5t by FY15, implying a CAGR of ~27% over FY12-15. The incremental growth drivers would be SME and retail segments; managment targets to increase the proportion of commercial banking and branch banking to 30% each as against 22% and 18%, respectively at the end of FY12.”
“Diversified fee income stream, sound ALM (NIM has remained at 2.8-3% irrespective of liquidity conditions) and strong control over opex and asset quality are the key strengths for YES. With deregulated savings deposit rates, strong branch expansion and focused strategies, we expect savings deposit traction to remain healthy. While operating parameters remain strong, any negative surprise on asset quality remains a key risk to RoA and RoE estimates of 1.5%+ and 23%+. We expect EPS CAGR of ~24% over FY12-14 (without assuming dilution), on the back of 42% EPS CAGR over FY08-12. Maintain Buy,” says Motilal Oswal research report
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