YESBank

Yes Bank reported a beat in PAT with strong allround performance on most
operating metrics and most importantly, big surprise on asset quality. Yes Banks
partialrecoveryandrelativelylowerwriteoffsonDeccanChronicleaddssignificant
credibility to their credit underwriting. With strong operating metrics, stable asset
quality and best in class ROEs, Yes Bank remains our top pick and we increase our
Sep13PTtoRs480/share(rollover)implyingareasonable~11.5xFY14EPS.

October23,2012
Adarsh Parasrampuria
adarshparasrampuria@plindia.com
+91-22-66322236
Parul Gulati
parulgulati@plindia.com
+91-22-66322242
Rating
Price
Target Price
Implied Upside
Sensex
Nifty

BUY
Rs399
Rs480
20.3%
18,710
5,691

Delivering on growth: Yes delivered ~10% QoQ growth in customer assets,

implying ~33% YoY growth, though management highlighted that they remain
cautious and growth trends may not sustain. Fee income growth was also robust
at ~30% YoY growth with most fee income streams delivering high growth, except
financial markets. We expect a modest ~22% AUM growth in FY13 and we see
limited risk to our assumptions.

Uptickinmarginsbegin;liabilityfranchisecontinuestoimprove:Margins inched
up by 10bps QoQ after remaining flat for seven quarters as wholesale rates have
eased off and this benefit is likely to play out fully over H2FY13. Liability franchise
build up surprised with ~Rs8.8bn of SA accretion in Q2FY13 and CASA now stands
at 17.3% v/s 11% pre SA-deg (Sep-11). We factor in ~20bps of NIM expansion over
FY12-14 and we see scope for positive surprise on margins.

Big asset quality surprise: Asset quality improved with sequential fall in Gross
NPAs. The big surprise was the Rs2bn of Deccan exposure as Yes has recovered
Rs0.6bn, provided ~Rs0.5bn and has ~100% immovable collateral on its remaining
Rs0.7bn of exposure. Despite NPA provisions on Deccan, credit cost at just ~30bps
was a big surprise and adds significant credibility to Yes Banks underwriting.

Returnratiosremainbestinclass: Yes has been able to hold on to ROEs of +20%

over the last five years despite lower dependence on fees/assets (from >2% of
assets to <1.5% of assets). Also, SA de-reg has aided Yes Bank in addressing
investor concerns on liability franchise and with stable asset quality, we believe rerating catalysts are well in place. We rollover to Mar-14 book and increase our PT
to Rs480/share implying 11.5x FY14 earnings.

(PricesasonOctober23,2012)
Tradingdata
Market Cap. (Rs bn)
Shares o/s (m)
3M Avg. Daily value (Rs m)
Majorshareholders
Promoters
Foreign
Domestic Inst.
Public & Other
StockPerformance
(%)
1M
6M
Absolute
7.7
11.3
Relative
7.9
1.9
HowwedifferfromConsensus
EPS(Rs)
PL
Cons.
2013
34.4
31.8
2014
40.8
38.3

141.0
353.0
1364.4
25.90%
47.52%
14.32%
12.26%
12M
43.8
32.3
%Diff.
8.0
6.5

PricePerformance(RIC:YESB.BO,BB:YESIN)
(Rs)
450
400
350
300
250
200
150
100
50
0

Keyfinancials(Y/eMarch)
Net interest income (Rs m)
Growth(%)
Operating profit (Rs m)
PAT (Rs m)
EPS (Rs)
Growth(%)
Net DPS (Rs)

2011
12,469
58.3
11,904
7,271
20.9
48.9
2.5

2012
16,156
29.6
15,417
9,784
27.7
32.1
2.5

2013E
21,075
30.4
19,625
12,139
34.4
24.2
3.5

2014E
26,072
23.7
24,342
14,397
40.8
18.6
4.5

2011
2.61
21.1
1.52
3.7
3.7
19.1
0.6

2012
2.44
23.1
1.47
3.0
3.0
14.4
0.6

2013E
2.63
23.3
1.52
2.5
2.5
11.6
0.9

2014E
2.74
22.6
1.51
2.0
2.0
9.8
1.1

Source:Bloomberg

Oct-12

Aug-12

Jun-12

Apr-12

Feb-12

Dec-11

Oct-11

Profitability&Valuation
NIM(%)
RoAE(%)
RoAA(%)
P / BV (x)
P / ABV (x)
PE (x)
Netdividendyield(%)
Source:CompanyData;PLResearch

Prabhudas Lilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that
the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision.
Please refer to important disclosures and disclaimers at the end of the report

Q2FY13ResultUpdate

Deliveringonreratingcatalysts

YES Bank

Exhibit1: Q2FY13deliversonallcounts

StrongloangrowthandincreaseinNIMs
leadsNIIgrowth

2Q12

1Q13

2Q13

YoY

QoQ

Interest income

14,387

18,863

19,864

38.1%

5.3%

Interest expenses

10,530

14,142

14,622

38.9%

3.4%

Netinterestincome

3,856

4,722

5,242

35.9%

11.0%

Other income

2,141

2,881

2,768

29.3%

3.9%

Operating expenses

2,138

3,007

3,162

47.9%

5.2%

Preprovprofit

3,859

4,596

4,847

25.6%

5.5%

379

300

317

16.2%

5.7%

Profit before tax

3,481

4,296

4,530

30.2%

5.4%

PAThigherthanexpectedduetolower

Provision for tax

1,130

1,395

1,469

30.0%

5.4%

creditcosts

Profitaftertax

2,350

2,901

3,061

30.2%

5.5%

NIM

2.9%

2.8%

2.9%

0.0%

0.1%

NII/GII

26.8%

25.0%

26.4%

0.4%

1.4%

Cost to Income

35.6%

39.5%

39.5%

3.8%

0.1%

9.8%

6.5%

6.5%

3.3%

0.0%

32.5%

32.5%

32.4%

0.0%

0.0%

ProvisionincludesRs0.5bnforDeccan

Provisions

NIMincreaseonfallingwholesalecostsof
funds;fullimpactshouldcomeoverin
H2FY13

Provisions/PPOP
Tax rate
Balancesheetdata
Strongbalancesheetgrowthdrivenby
largecorporatesegment
CASAimprovesonstrongperformance

Advances

341,941

385,339

420,193

22.9%

9.0%

Advances(inclu.Creditsubs)

407,600

493,387

540,200

32.5%

9.5%

Deposits

440,759

502,081

522,908

18.6%

4.1%

Credit to Deposit

77.6%

76.7%

80.4%

2.8%

3.6%

CASARatio

11.0%

16.3%

17.3%

6.3%

1.0%

fromSAbalances
AssetQuality

Assetqualitycontinuestosurprise

Gross NPA

688

1,095

1,028

49.4%

6.1%

Net NPA

136

300

201

47.6%

32.9%

Gross NPA (%)

0.20%

0.28%

0.24%

0.0%

0.0%

Net NPA (%)

0.04%

0.06%

0.05%

0.0%

0.0%

LLP/Loans

0.45%

0.31%

0.32%

0.1%

0.0%

TotalFeeincome

2,141

2,881

2,769

29.3%

3.9%

Financial markets

410

945

471

14.9%

50.2%

Financial advisory

978

1,025

1,196

22.3%

16.7%

Transactional banking

609

694

796

30.7%

14.7%

3rd party and retail fees

144

217

306

112.5%

41.0%

Source:CompanyData,PLResearch

October 23, 2012

YES Bank

Exhibit2: Stronggrowthdrivenbylargecorporatebook
Reported growth

Loan (inclu. credit subst.)

70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

Source:CompanyData,PLResearch

Exhibit3: Marginsinchuponfallingwholesalecostoffunds
Exhibit4: CASAcontinuestheupwardtrend

3.30%

18.0%

3.20%

16.0%

3.10%

14.0%

3.00%

12.0%

2.90%

10.0%

2.80%

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

6.0%
2Q11

2.60%
1Q11

8.0%
4Q10

2.70%

Source:CompanyData,PLResearch

4.0%
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Source:CompanyData,PLResearch

Exhibit5: Allthesegmentsperform,exceptforfinancialmarkets
3,500
3,000

Financial markets

Financial advisory

Transactional banking

3rd party and retail fees

(Rsm)

2,500
2,000
1,500
1,000
500
0
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

Source:CompanyData,PLResearch

October 23, 2012

YES Bank

Exhibit6: Creditcostscontinuestoremainlow

Exhibit7: Continuestomaintainrobustassetquality

0.90%
0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%

Gross NPL Ratio

Net NPL ratio

0.30%
0.25%
0.20%
0.15%
0.10%
2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

0.05%

Source:CompanyData,PLResearch

0.00%
3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Source:CompanyData,PLResearch

Exhibit8: ROEsremainbestinclass
ROETree

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

NetInterestIncome/Assets 2.48% 2.51% 2.44% 2.58% 2.56% 2.48% 2.49% 2.60%

Fees/Assets

1.24% 1.34% 1.14% 1.43% 1.26% 1.47% 1.52% 1.37%

Investment profits/Assets

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Netrevenues/Assets

3.73% 3.85% 3.58% 4.01% 3.82% 3.95% 4.00% 3.97%

OperatingExpense/Assets -1.33% -1.34% -1.34% -1.43% -1.44% -1.57% -1.58% -1.57%

Provisions/Assets

-0.19% -0.31% -0.01% -0.25% -0.13% -0.16% -0.16% -0.16%

Taxes/Assets

-0.73% -0.73% -0.74% -0.76% -0.73% -0.72% -0.73% -0.73%

Total Costs/Assets

-2.26% -2.39% -2.09% -2.44% -2.30% -2.45% -2.48% -2.46%

ROA

1.47% 1.46% 1.49% 1.57% 1.52% 1.50% 1.53% 1.52%

Equity/Assets
ROE

6.9%

6.7%

6.7%

6.9%

6.6%

6.4%

6.4%

6.4%

21.3% 21.7% 22.1% 22.6% 23.0% 23.6% 24.0% 23.8%

Source:CompanyData,PLResearch
Exhibit9: Sep'13TPatRs480/Share
Risk free rate

8.0%

Equity Risk Premium

6.0%

Beta

1.05

Cost of Equity
Terminal growth

14.3%
5.0%

Stage 2 growth

26.0%

Normalised ROEs

20.0%

Sep13PT

480

Implied Mar-13 P/B

2.9

Implied Mar-13 P/E

14.0

Source:PLResearch

October 23, 2012

YES Bank
IncomeStatement(Rsm)
Y/eMarch
Int. Earned from Adv.
Int. Earned from Invt.
Others
Total Interest Income
Interest expense
NII
Growth(%)
Treasury Income
NTNII
Non Interest Income
Total Income
Growth(%)
Operating Expense
OperatingProfit
Growth(%)
NPA Provisions
Investment Provisions
Total Provisions
PBT
Tax Provisions
EffectiveTaxRate(%)
PAT
Growth(%)

BalanceSheet(Rsm)
Y/eMarch

2011

2012

2013E

2014E

29,891
10,273
253
40,417
27,948
12,469
58.3
(464)
6,696
6,233
46,650
58.4
6,798
11,904
37.9
914
(72)
982
10,922
3,650
33.4
7,271
52.2

44,268
18,470
335
63,074
46,917
16,156
29.6
379
8,207
8,586
71,659
53.6
9,325
15,417
29.5
523
160
902
14,514
4,730
32.6
9,784
34.6

51,208
24,258
436
75,902
54,827
21,075
30.4
1,000
10,593
11,593
87,495
22.1
13,043
19,625
27.3
1,609

1,609
18,016
5,877
32.6
12,139
24.1

60,870
26,631
463
87,963
61,891
26,072
23.7
800
13,900
14,700
102,663
17.3
16,430
24,342
24.0
2,974

2,974
21,368
6,970
32.6
14,397
18.6

2011

2012

2013E

2014E

Par Value
10
No. of equity shares
347
Equity
3,471
Networth
37,941
Adj. Networth
37,849
Deposits
459,389
Growth(%)
71.4
Low Cost deposits
47,509
%oftotaldeposits
10.3
TotalLiabilities
590,070
Net Advances
343,636
Growth(%)
54.8
Investments
188,288
TotalAssets
590,070
Source:CompanyData,PLResearch.

10
353
3,530
46,766
46,592
491,517
7.0
73,921
15.0
736,621
379,886
10.5
277,573
736,621

10
353
3,530
57,460
57,048
579,664
17.9
107,238
18.5
865,477
448,266
18.0
321,580
865,477

10
353
3,530
69,998
69,212
707,336
22.0
152,077
21.5
1,036,288
564,815
26.0
356,873
1,036,288

QuarterlyFinancials(Rsm)
Y/eMarch
Q3FY12

Q4FY12

Q1FY13

Q2FY13

16,841
12,565
4,276
2,114

6,390
2,402
1,217
1,185
3,988
3,988
224

3,765
1,224
2,541

2,541

17,851
13,369
4,482
2,664

7,146
2,842
1,337
1,505
4,304
4,304
285

4,019
1,301
2,718

2,718

18,863
14,142
4,722
2,881

7,603
3,007
1,552
1,455
4,596
4,596
300

4,296
1,395
2,901

2,901

19,864
14,622
5,242
2,768

8,009
3,162
1,642
1,520
4,847
4,847
317

4,530
1,469
3,061

3,061

2011

2012

2013E

2014E

399
347
138,633
23.5
20.9
109
109
19.1
3.7
3.7
2.5
0.6

399
353
140,966
19.1
27.7
132
132
14.4
3.0
3.0
2.5
0.6

399
353
140,966
16.3
34.4
163
163
11.6
2.5
2.5
3.5
0.9

399
353
140,966
13.6
40.8
198
198
9.8
2.0
2.0
4.5
1.1

2011

2012

2013E

2014E

2.6
1.5
21.1

2.4
1.5
23.1

2.6
1.5
23.3

2.7
1.5
22.6

Efficiency
Y/eMarch

2011

2012

2013E

2014E

CostIncomeRatio(%)
CDRatio(%)
Business per Emp. (Rs m)
Profit per Emp. (Rs m)
Business per Branch (Rs m)
Profit per Branch (Rs m)

36.3
74.8
206
19
3,752
34

37.7
77.3
194
22
3,541
40

39.9
77.3
199
24
3,632
43

40.3
79.9
214
24
3,909
44

AssetQuality
Y/eMarch

2011

2012

2013E

2014E

Gross NPAs (Rs m)

805
Net NPAs (Rs m)
92
Gr.NPAstoGrossAdv.(%)
0.2
NetNPAstoNetAdv.(%)

NPACoverage(%)
88.6
Source:CompanyData,PLResearch.

839
175
0.2

79.2

1,980
412
0.4
0.1
79.2

3,780
787
0.7
0.1
79.2

Interest Income
Interest Expense
NetInterestIncome
Non Interest Income
CEB
Treasury
NetTotalIncome
Operating Expenses
Employee Expenses
Other Expenses
OperatingProfit
Core Operating Profit
Provisions
Loan loss provisions
Investment Depreciation
Profitbeforetax
Tax
PATbeforeEO
Extraordinary item
PAT

KeyRatios
Y/eMarch
CMP (Rs)
Equity Shrs. Os. (m)
Market Cap (Rs m)
M/CaptoAUM(%)
EPS (Rs)
Book Value (Rs)
Adj. BV (75%) (Rs)
P/E (x)
P/BV (x)
P/ABV (x)
DPS (Rs)
DividendYield(%)

Profitability(%)
Y/eMarch
NIM
RoAA
RoAE

October 23, 2012

YES Bank

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India
Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
RatingDistributionofResearchCoverage

%ofTotalCoverage

60%

53.3%

50%
40%
30%

23.0%

23.0%

20%
10%

0.8%

0%
BUY

Accumulate

Reduce

PLsRecommendationNomenclature

Sell

BUY

Over 15% Outperformance to Sensex over 12-months

Accumulate

Outperformance to Sensex over 12-months

Reduce

Underperformance to Sensex over 12-months

Sell

Over 15% underperformance to Sensex over 12-months

TradingBuy

Over 10% absolute upside in 1-month

TradingSell

Over 10% absolute decline in 1-month

NotRated(NR)

No specific call on the stock

UnderReview(UR)

Rating likely to change shortly

This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. Ltd. Mumbai, India (PL) and is meant for use by the recipient only as
information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be
considered or taken as an offer to sell or a solicitation to buy or sell any security.
The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy
or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accept any responsibility of whatsoever nature for the information,
statements and opinion given, made available or expressed herein or for any omission therein.
Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The
suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an
independent expert/advisor.
Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or
engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication.
We may from time to time solicit or perform investment banking or other services for any company mentioned in this document.

October 23, 2012