Yes Bank: Fee Income boosts profits

Booming markets have bucked Yes bank’s profits this quarter with non interest income up 88.8% y-o-y, in the second quarter of FY10. Fee income constituted nearly 48% of total net income for the first half of this year. Net profit grew 75% y-o-y and was up 11.6% over the first of FY10.

Yes Bank saw advances grow 41.5% y-o-y this quarter to Rs 16,294 crore compared to Rs 11,515 crore at the end of 2QFY09. Total deposits were up 35.1% in the same period. Low cost deposits are about 9.6% of total deposits.

Net interest income (NII) was up 30.5% y-o-y to Rs 160 crore. On adjusting for about Rs 14-16 crore Mark to Market provisioning expenses for swap transactions, NII is up about 40% y-o-y, according to an IDFC SSKI report.

Stable margins

Being largely wholesale funded, the current liquidity flush environment (cost of funds were down about 90 bps) helped keep margins stable at 3.1% over last quarter even as high share of advances to large advances ( over 97 % of incremental advances) left yields on advances down about 110 bps.

Asset quality has improved as has loan loss coverage. Gross NPAs are down to 0.31% of total advances against 0.48% in 1QFY10. Net NPA ratios are at 0.08 compared to 0.24 in he last quarter.
 
The bank restructured loans of  around Rs450m (0.28% of gross loans) this quarter as per IDFC SSKI. Cumulative restructured loans are about Rs1.6bn which is about 0.96% of gross advances. Total impaired assets are 1.26% of net advances.
 
Balance sheet

The banks capital adequacy is at 17.3% with Tier 1 capital at 9.4% down from 10.28 % at the end of the last quarter. The bank recently raised Rs2.6bn of subordinated debt through private placement to investors like LIC, GIC and IFCI. Management has indicated that it will raise capital shortly to fund future growth at the current pace.

The stock closed at Rs 255.65 at close on 23 Oct 2009 trades at a price to one year forward book ratio of 2.3x FY11 adjusted book value per share as per IDFC SSKI forward estimates.