>YES BANK (INDIA INFOLINE)

COMPANY UPDATE

Extremely tight liquidity conditions affected loan book growth in Q3 FY09.
Yes Bank, a new generation indian private bank, has delievered robust growth in its loan book (100% + yoy) over the past three years. The exceptional growth was driven by its aggressive stance and focused knowledge-based corporate banking strategy. However, over the past few quarters, the loan book growth has decelerated significantly (base effect catching up). In Q3 FY09, there was a marked slowdown with the loan book growing by a mere 27% yoy - against average 75% yoy in previous six quarters. More importantly, the loan book declined by 5% qoq. Bank attributed Q3 FY09 performance to exceptional liquidity conditions during Oc--Nov '08. Primarily wholesale funded (with CASA at just ~9 %), Yes bank was more affected than other banks with depositis declining by 6% qoq.

Qoq growth in loan book to resume from Q4 FY09.
Bank expects loan book to grow sequentially in Q4 FY09 but accedes that growth may not reach earlier levels given the deterioration in credit environment and waning credit demand. Loan book growth would be driven by new clients acquired during Q3 FY09. The bank was successful in breaking into some large corporate clients during the tight liquidity period of Oct-Nov '08. Going forward, it intends to churn its loan portfolio and prioritize funds towards those clients where the opportunity for cross-selling is maximum. We reckon that loan book could increase by 6-7% qoq in Q4 and therefore full-year growth could be in the range of 23-25% yoy.

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