We believe Yes Bank will get rerated after reporting stellar Q4FY18 results. Before results, we were expecting an upside of 30 percent plus by FY19 end. After this strong performance, we would not be surprised if it delivers 50 percent upside from current market price by FY19 end.
As expected, the results of the Bank were above expectations. What we like the most of Q4FY18 result, that the bank witnessed a strong lending growth with decline in gross NPAs amidst environment of rising NPAs in other private sector banks and PSU banks. The bank’s strategy has always been improving the share of low-cost and retail deposits.
The Bank reported 29 percent YoY rise in net profit at Rs 1,179.40 crore, which was higher than Rs 1,050 crore estimated by us. The private lender had reported Rs 914 crore profit in the corresponding quarter last year.
The bank registered strong earnings delivery. Healthy growth in NII leading to PAT growth of 29 percent (Rs. 1,179.4 crores) in Q4FY18 and 26.9 percent (Rs 4,224.6 crore) in FY18. Crossed significant milestones of Rs 3 Lakh crore in total assets.
The bank witnessed well segmented and granular growth. Advances growth of 53.9 percent Y-o-Y spread across corporate, MSME and retail businesses. Core retail banking advances doubled in last one year, now at 12.2 percent of total advances, coupled with healthy growth of 34.4 percent in MSME.
Healthy Asset Quality delivery: Improvement in both GNPA (1.28 percent from 1.72 percent sequentially) and NNPA (0.64 percent from 0.93 percent sequentially). Credit costs contained at 76bps for FY18. Of the total divergence of Rs 6,355.2 crore in FY17, the bank upgraded accounts worth Rs 2,632.7 crore as standard.
Net Profit grew by 29 percent Y-o-Y (Rs 1,179.4 crore) for Q4FY18 and 26.9 percent Y-o-Y (Rs 4,224.6 crore) in FY18. Net Interest Income grew by 31.4 percent Y-o-Y (Rs 2,154.2 crore) for Q4FY18, and 33.5 percent Y-o-Y (Rs 7,737.1 crore) in FY18.
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