Yes Bank set Street on fire with 10% rise on back of stellar numbers; silences critics on Asset Quality

Yes Bank positively surprised markets with a stellar set of numbers reported earlier today and literally lifted the mood on the street with their robust results and pushed the Nifty and Bank Nifty into green.

Key highlights from the results announcement

  • Robust Growth– Total assets grew by a whopping 45%, with loan growth even better at 54%, making the balance sheet more than 3 lakhs crore. This was on the back of very significant loan growth
  • Strong Earnings Delivery– The bank beat street estimates by posting an excellent 29% growth in PAT to Rs. 1180 crore for the quarter and 4225 crore for FY 18
  • Best Asset Quality amongst peer banks- Most impressive was the improvement in Asset quality, with large fall in both GNPA and NNPA. Credit cost was contained at 75 bps

While there are several positives to Yes Bank beyond the numbers, some of the most important aspects are –

  1. Highly detailed disclosures– Yes Bank had been on the receiving end of RBI’s supervision and was the first bank to report divergences in Q2 FY18. That had created an overhang on the stock. This time the bank has literally gone overboard on disclosures giving a highly detailed low down on Asset Quality. This has hugely impressed even the most pessimistic analysts and will be a huge positive for the bank in the next quarters, where they have literally handled almost all the divergences reported. The low down of these disclosures also highlight the very impressive movement on reducing the NPAs, becoming the only bank to post significant improvement in asset quality.
  2. Growth, growth and more positive growth– Yes has always been the best private bank for growth. The results this year have seen phenomenal loan growth of over 50%, highlighting the overall impetus in the economy. Further, the Retail franchise of the bank is seeing very impressive and granular growth which will make Yes command much richer valuations. On closer look, their retail and MSME business is now fully delivering and will help the bank generate more CASA as well as far more granular and continuous fee incomes. CASA ratio is already stable over 35% and contribution from the highly profitable Retail Assets business is also clocking impressive growth. All this will significantly enhance profitability in the future quarters.
  3. The reappointment of Rana Kapoor is probably the biggest positive. Rana Kapoor has single handedly established Yes Bank from inception into a banking powerhouse making annual profits of over Rs. 4200 crore. Rana has also ensured that Yes continues to impress on softer aspects like Technology, Talent Management and CSR. Rana Kapoor’s track record has been flawless in all aspects of leading the bank as a promoter CEO

 

Fundamental Analysts, Traders and Commentators were in awe of these excellent set of numbers and I expect a significant re-rating of the Yes stock by all major brokerages in the next few days. Inspite of the 10% rally on the counter post results, Yes continues to trade much cheaper than most comparable private sector peers largely because of skeptical analysts. Clearly all the skeptics have been proved wrong today.

The stock is trading 13 times FY 19 earnings compared to 26x for IndusInd and HDFC. I believe the stock will cross 400 in next few trading sessions and is well headed to breach the all important 500 mark in the coming months.

If you are a medium or long term investor, its time you Say YES to Yes!

 

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