YES Bank

#1
Alchemist,
Among the private sector banks Yes bank seems to be an exciting stock. What do you think about its prospects? How do you see its future growth?

Anirban
 

Alchemist

Administrator
Staff member
#2
YES Bank reported its quarterly results yesterday.

The results were above market expectations.

The bank has a small base and thus its growth is expected to be strong for next 3-5 years.

However, the banking sector is getting highly competitive and its is difficult to predict long-term prospects of smaller banks like YES Bank.

The bank's eps for FY 2008 was Rs 6.75.

FY 2009 eps is expected to be around Rs 10.
FY 2010 eps is expected to be around Rs 12.5.

If the bank has to grow fast, it will have to dilute equity. This will bring down earnings. (The above estimates already factor in a dilution of around 6%).

As it is smaller player in the banking sector, I wouldn't like to give much premium to this stock.

If we give a conservative 15 times forward multiple to the bank, one can expect the stock to be around Rs 188 by April 2009.

This is just 10% above current market price.

This is a conservative price target, but considering the uncertainties in the economy and stock markets, it makes sense to be conservative right now.


The stock can be bought as an investment for 1-3 years, but I would suggest an entry at a lower price.

YES Bank has a good support in the 140-142 zone and this may be a good entry point for investors.

One will need to relook at the stock after 1 year. Smaller companies are very unpredictable and an investors needs to keep a close watch at them.
 

man4urheart

Well-known member
#3
Alchemist! how did you arrive at P/E of 15 as mentioned above?

What is the method you follow in allocating P/E? you took the banking P/E as a whole or kept a best guess from Peers?

I actually use method, which you must have noticed in my posts to check a anchor price in past and then arrive at price parallel to growth in EPS.

Is my method correct and can you explain your methodology!
 

Alchemist

Administrator
Staff member
#4
Alchemist! how did you arrive at P/E of 15 as mentioned above?

What is the method you follow in allocating P/E? you took the banking P/E as a whole or kept a best guess from Peers?

I actually use method, which you must have noticed in my posts to check a anchor price in past and then arrive at price parallel to growth in EPS.

Is my method correct and can you explain your methodology!
I used PE ratio's of other private banks as a benchmark.

With time as YES bank's base grows, its growth rate will become similar to that of other private banks.

Currently, the bank can be given a higher PE as its growth rate is better than other private sector banks, but this won't be the case in future.

I will comment to your "anchor price theory" in the relevant thread.
 

R79

New member
#5
Hi,

I am planning to invest in the banking sector and looking at a few banks, Yes Bank and Andhra Bank in particular. The investment period would be 1-2 years, and maybe longer depending on the performance of the stocks.

Please suggest which one of these banks would be a better option to invest considering the future growth.

-Radhika
 
#6
Yes Bank has been severely beaten down dur to the fear of it's exposure to MFI sector and provisioning thereof.

What will be the proper levels to enter and average ?
 
#9
DNA newspaper in its new analysis has done post mortem of the financial health of this stock.

I am exiting my holding from this tock which i bought 18 months back of 10 shares.
Whenever you act on news and views from others it is very difficult to remain invested and make long term money.

Try to go through the Annual Reports and company conference calls to understand a business, it's key strength and weaknesses.

With the strong management, improving traction in CASA and broad based lending (shift towards more retail assets) the bank would do good. Also they will never dilute the book cheaply as compared to other random private banks.

Develop your own conviction and take every news report for information purpose only.
 
#10
Expect interest rates to go down towards fiscal-end: Rajat Monga, Yes Bank - The Economic Times.

ET Now: Give us a sense of your asset quality. What are the main stress sectors? While your NPAs have decreased, is there still a danger of fresh slippages this quarter?

Rajat Monga: We see only one account slip this quarter. In terms of the recent trends, this quarter has been clearly better as far as slippages are concerned. However, we are a little bit exposed to one particular midsize account, which is not yet into a slippage category, but we believe there is a reasonably threat for it to slip. So we have been taking some pre-emptive provisioning. We have taken about Rs 45 crore provisioning in this quarter just to pre-empt any further situation development on this particular account. So our asset quality is carrying that. However, in terms of the delinquency position, this quarter has been very encouraging.

ET Now: Anything on Deccan Chronicle,is it an NPA account for you? What options would you have now to recover the money?

Rajat Monga: Our net exposure, net of provisioning, is about Rs 65 crore and we have more than this amount of collateral that is still exclusively available to us. However, there is sometimes a legal process, sometimes a bilateral process that we have to undergo. So overall, on a bad day we should have already provided for 80% of the expected loss on this account. Therefore, we are now reasonably comfortable about the situation in this account.
 

Alchemist

Administrator
Staff member
#11
What's wrong with Yes Bank?

Is the fall just because of the bank's high dependence on money markets or there is something else too?

The volume is abnormally high in this stock.

Till now,

NSE volume: 1.55 crore shares.

BSE volume: 0.30 crore shares.

Total: 1.85 crore shares.

The bank has little less than 36 crore shares outstanding.

At this rate, by the end of the day, almost 10% of the bank would be traded.
 
#13
I think what you have mentioned is a big enough reason. Its liability side is its weakness. Its strength is its relatively better asset quality with good growth.

If it heads closer to 300 it would be a very good investment. What do you feel?
 

Alchemist

Administrator
Staff member
#14
I think what you have mentioned is a big enough reason.
I am not convinced.

The price-volume action is too disturbing.

I feel either the stock has a technical problem (one or more big players have been forced to liquidate their positions in this stock) or there is some fundamental reason for this fall which we don't know or are ignoring.

See post #7 by magnet.

There are some other issues with the bank besides its high cost of funds.

e.g.

- As per the article, 18.2% of its loan book consists of "other loans" and we don't know what these other loans are.

- As per the article, the bank is highly leveraged compared to other private banks.

- The bank's risk-weighted assets to advances ratio is very high. In other words the bank has more exposure to riskier segments of the economy.

- The biggest concern, according to the article, is the bank's non-fund based exposure. These items are off balance sheet and thus are overlooked when economic conditions are favorable.

An article on off balance sheet exposure of private banks (2011):

Off balance sheet items a concern for private banks
 
#15
Some of the concerns in the article are no longer applicable while other have always been there.

Also the article seems to be written with the intention of being as negative as possible

For example,

On the one hand it says,

"Generally, the corporate book also helps in driving higher fee income and thereby a healthy total income for a bank"

whereas at another point it says

"In the first quarter of this fiscal, other income grew by an astounding 75%, helping profit take a 34%year on year leap.Shorn of that number, the bottomline would have been more or less flat."

which is totally condradictory.

Also though I have not looked at the numbers during that period, looking at today's results, it seems like the article is using quarter-to-quarters fluctuations to portay it as a trend (ROA, NIM)

I do not have exposure to Yes Bank, but I am keen converting some older PSU bank holding to private banks including Yes Bank at the right price. I am waiting because I felt PSU banks might recover more if there is a turnaround. But if private banks crack a lot, it might be a good time to make the switch.
 

Alchemist

Administrator
Staff member
#16
Delivery data for Yes Bank (24th July).

NSE: 85,22,673.
BSE: 12,27,667.
Total: 97,50,340

Total shares issued:35,97,20,935
Free float: 26,74,78,485.

2.71% of the bank was sold today.
3.65% of the bank's free float was sold today.
 

Alchemist

Administrator
Staff member
#17
2.71% of the bank was sold today.
3.65% of the bank's free float was sold today.
Corresponding figures for other financial institutions is as follows:

Canara Bank
0.52%
0.17%

Axis Bank
0.63%
0.36%

IndusInd Bank
0.84%
0.61%

Bank of India
0.43%
0.16%

IDFC
0.38%
0.38%
 
#18
I sold some HUL shares and purchased 400 shares in Yes Bank at Rs 371.

In my opinion,the concerns on the impact of RBI measures look overdone.

Of course,next week if RBI took any more 'steps' the stock may fall more possibly to 330 and further to even 280 levels.

So I initiated a ratio put spread,purchased 1 lot Aug 380 strike put at Rs 26.50 and sold 2 lots Aug 330 strike put at Rs 8.40.
 
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