>YES BANK(INDIA BULLS)

Yes Bank’s net profit for Q1’10 surged 84.2% yoy to Rs. 1.0bn, driven by
a robust rise in non-interest income, which in turn increased primarily
because of higher treasury income of Rs. 850mn. During the quarter, the
Bank’s advances increased 2.2% q-o-q while deposits decreased by
5.1%. Our outlook for the next few quarter is negative for the Bank due to
heavy dependence on non-interest income (a key driver of the stock
price), a portfolio skewed towards corporate banking, and a volatile
deposits base with a low CASA ratio. Our DECF valuation suggests a fair
value of Rs. 177, indicating a potential downside of 9.9% over the current
stock price. Moreover, the stock is trading around its 52 week high with
the P/B ratio of around ~3.3x, which we believe is high given the volatile
nature of income and the growth prospects. Thus, we downgrade the
stock from Hold to Sell.
NPAs likely to continue trending upwards: At the close of Q1’10, the
Bank’s Gross NPA ratio stood at 0.48% and restructured advances worth
Rs. 1.2bn (0.94% of gross advances). However, being conservative, the
Bank increased its total provisioning by more than 4 times yoy to
Rs 455.3 mn leading to an increase in the coverage ratio from 18.2% in
Q1’09 to 50.5% in Q1’10. Our expectation regarding NPAs remains
unchanged as the Bank has high exposure to the corporate segment
(constitutes 64.7% of wholesale banking), thereby increasing the chances
of slippages where the probability of a sharp spike in NPAs is greater due
to large-ticket loans.

To read full report :- YES BANK(INDIA BULLS)