1

Stock Data

Sector Banking

Face Value (Rs.) 10.00

52 wk. High/Low (Rs.) 388.00/223.00

Volume (2 wk. Avg.) 586000

BSE Code 532648

Market Cap (Rs.mn.) 97973.70

Financials (Rs.mn.) FY10 FY11E FY12E

Net Income 20033.20 37061.42 53739.06

Operating Profit 5276.50 10534.49 13287.92

PAT 3038.40 6162.67 7687.06

EPS (Rs.) 10.23 17.85 22.27

P/E (x) 32.25 18.48 14.82

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SYNOPSIS

YES BANK is the only Greenfield license awarded by the RBI in the last 15 years, associated with the finest pedigree investors.

Yes Bank reported a net profit of 57.78% and stood at Rs 1762.60 million for the quarter ending on Sept 30, 2010 against Rs 1117.10 million.

NIM of the bank stood at 3.0% against 3.1% for Sep 30, 2009.

Yes Bank has entered into MOU with Shinsei Bank to offer an higher level of information and financial services.

Yes Bank inks with Israel-based investment bank -Poalim Capital Markets to offer advise on cross-border transactions to India and Israel based companies.

The Netherlands-based Rabobank has sold close to 11% stake in private sector lender, Yes Bank.

Yes Bank has raised planned to raise a cumulative of Rs 1171 crores in Q2 FY 11 from Banks, Insurance Companies, Provident Funds and Corporates.

Net Income and PAT of the bank are expected to grow at CAGR of 39% & 36% over FY09 to FY12E.

1 Year Comparative Graph

YES Bank BSE SENSEX

V.S.R. Sastry

Equity Research Desk

vsrsastry@firstcallindiaequity.com

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

drsastry@firstcallindia.com

C.M.P: Target Price: Rs.329.90 Rs. 379.00

Share Holding Pattern

Dec 2nd, 2010

2

Peer Group Comparison

Name of the company CMP

Market Cap. (Rs. Mn.)

EPS (Rs.)

P/E (x)

P/BV (x) Dividend (%)

YES BANK 329.90 97973.70 14.06 23.46 4.19 15.00

ICICI Bank 1191.80 1371559.20 37.96 31.40 2.66 120.00

HDFC BANK 2386.00 1105160.70 72.95 32.71 5.13 120.00

AXIS BANK 1430.65 586122.20 70.73 20.23 3.65 120.00

Investment Highlights

Q2 FY11 Results Update

Yes Bank reported results for the quarter ended on Sept 30. 2010. On a standalone

basis, its net profit registered a growth of 57.78% and stood at Rs 1762.60 million for

the quarter ending on Sept 30, 2010 against Rs 1117.10 million in the same quarter

last year. Interest expended of the bank stood at Rs 3,669.60 million for the quarter

ending on Sept 30, 2010 against Rs 6,406.30 million for the quarter ending on Sept

30, 2009. The bank`s interest earned for the quarter ending on Sept 30,2010 stood at

Rs. 9537.90 million as against Rs 5269.10 million for the quarter ending on Sep.30,

2009, an increase of 81.02%. Bank posted earnings of Rs 5.11 a share during the

quarter, registering 36.27% growth over prior year period.

Yes Bank has reported a robust financial performance for Sep quarter 2010, with a

recorded profit of Rs 1762.60 million. It has maintained sustainable growth in the net

interest income with a growth of 42.57% (YoY) and 9.42% (QoQ).The bank has

maintained high productivity and has managed to maintain RoA’s at or above 1.5%

over the past 8 years. The bank has successfully maintained at the comfortable levels

of capital to fund growth plans in the market through its long term debt.

3

Quarterly Results - Standalone (Rs in mn)

As at Sep - 09 Sep - 10 %Change

Net Income 5269.10 9537.90 81.02

Net Profit 1117.10 1762.60 57.78

Basic EPS 3.75 5.11 36.27

4

Segment wise Revenue

Particulars (Rs.mn.) Q2 FY11

Retail Banking 453.50

Corporate/Wholesale Banking 7968.80

Treasury 3651.50

Other Banking Operations 37.20

Total Business 12111.00

5

Healthy Asset Quality

Gross Non Performing Advances as a proportion of Gross advances was at 0.22% while Net Non Performing Advances as a proportion of Net advances was at 0.06% as at September 30, 2010 as against 0.31% and 0.08% respectively as at September 30, 2009. Bank’s total loan loss coverage ratio was at 299% while specific provisioning cover was at 74.7% as at September 30, 2010.Total restructured advances (excluding NPAs) declined by Rs 11.40 crore sequentially to Rs 69.00 crore as at September 30, 2010, which constituted 0.23% of the Gross Advances (Sept 30, 2009 Restructured advances was at 0.96% of Gross Advances).

Exponential Growth of Advances & Deposits

Total Advances grew by 86.3% to Rs 30,348.1 crore as at September 30, 2010 from Rs 16,294.3 crore as at September 30, 2009.Investments grew by 107.0% to Rs14, 454.60 crore as at September 30, 2010 from Rs 6,981.4 crore as at September 30, 2009.

Total Deposits grew by 106.6% to Rs 40,013.70 crore as at Sep 30, 2010 from Rs

19,365.10 crores at Sept. 30, 2009. Current and Savings Account (CASA) deposits

grew by 118.9% to Rs 4,052.80 crore taking the CASA ratio to 10.1% as at Sept. 30,

2010.

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The Balance sheet of the bank grew by 96.4% to Rs 51,796.30 crore against Rs

26,370.10 crore at Sep. 30, 2009.

Break-up of the total non-Priority Sector Lending as at Sep.30,2010 was as follows - Wholesale Banking (69.8%), Commercial Banking (19.6%), and Branch Banking (10.6%).

Strong Net Interest Income Growth

Net interest income has increased by 77.9% from Rs 176.00 crore to Rs 313.20 crore.

NIM of the bank has maintained a sustained steady growth in advances and

investments. NIM of the bank stood at 3.0% against 3.1% for Sep 30, 2009.

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MOU with Shinsei Bank

Yes Bank has entered into MOU with Shinsei Bank to offer an higher level of

information and financial services to customer on cross-border merger and

acquisition, joint ventures and other strategic alliances between India and Japan.

Shinsei Bank is a leading diversified Japanese financial institution providing a full

range of financial products and services to both institutional and individual

customers. The bank has total assets of $125.4 billion on a consolidated basis (as of

September 2010) and a network of 42 outlets.

Ratings from Moody’s Investors Services

Yes Bank, India's new age private sector bank, has received its maiden rating from

Moody's Investor Services. It has been assigned a Baa3 long-term and Prime-3 short-

term global local currency deposit ratings by Moody's. The outlook on all ratings is

stable. The Baa3 rating is an investment grade rating, at par with India's Sovereign

Debt Rating.

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Moody's Investor Services is a leading provider of credit ratings, research and risk

analysis. The firm's ratings and analysis track debt covering more than 110 countries

and 12,000 corporate issuers. The rating reflects the bank's rapidly growing franchise

as India's fourth largest private-sector bank.

Allotment of Shares under ESOP

Yes Bank has allotted 6,38,670 equity shares of face value of Rs 10 each on October

08, 2010 under the Joining Stock Option Plan - I (JSOP-I), Joining Employee Stock

Option Plan-II (JESOP-II), Joining Employee Stock Option Plan-III (JESOP-III) YBL

ESOP and YBL JESOP V/PESOP-II.

Yes Bank has allotted 14,72,980 equity shares of face value of Rs 10 each on

September 09, 2010 under the joining stock option plan - I (JSOP-I), joining employee

stock option plan-II (JESOP-II),joining employee stock option plan-III (JESOP-III), YBL

ESOP and YBL JESOP V / PESOP-II.

Raising of Capital

Yes Bank has raised planned to raise a cumulative of Rs 1171 crores in Q2 FY 11 from

Banks, Insurance Companies, Provident Funds and Corporates. It has raised an

amount of Rs 225 crore through Perpetual Tier I capital through private placement of

Innovative Perpetual Debt Instruments rated LAA- by ICRA with provident funds and

PSU Banks. This is the highest-credit-quality rating assigned by ICRA to short-term

debt instruments. Instruments rated in this category carry the lowest credit risk in the

short term.

Bank has raised Rs 440 crore of Upper Tier II subordinated Debt from Life Insurance

Corporation of India (LIC) and an additional of Rs 200 crore of Upper Tier II 15 year

maturity paper. In addition it has also raised an amount of Rs 306 crores of Lower Tier

II Debt rated LAA by ICRA and CARE AA by CARE.

Financial Advisory

Yes Bank is the Exclusive Advisor to Sadbhav Infrastructure Project Ltd to raise

private equity of Rs 400 crores from funds managed by Norwest Venture Partners and

The Xander Group Inc, for its road projects execution.

Yes Bank is the Mandated Lead Arranger of Senior Debt of Rs 7.89 Billion for a leading

Infrastructure Company in the state of Gujarat.

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Inks with Poalim Markets

Yes Bank one of the leading private sector lenders of the country inks with Israel-

based investment bank -Poalim Capital Markets to offer advise on cross-border

transactions to India and Israel based companies. This move helps Yes bank to

enhance the investment portfolio and also strengthens business ties between two

countries.

Rabo Bank sells its Stake

The Netherlands-based Rabobank has sold close to 11% stake in private sector lender,

Yes Bank, through various block deals on the two premier stock exchanges of the

country - the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

The Dutch lender sold around 3.8 crore equity shares of Yes Bank at an average price

of Rs 266.16 aggregating Rs 1,000 crore by which the lender has now stood at 4.9%

against 15.9%.

Rabobank which is among the world 20 largest financial institutions and is also one of

the Europe’s most recognized financial institution has considered setting up its own

branch in India but policy hurdles made it difficult. The move to exit the Yes Bank is

the strategic part to foray into Indian Markets.

Company Profile

YES BANK, India's new age private sector Bank, is an outcome of the professional

entrepreneurship of its Founder, Rana Kapoor and his highly competent top

management team, to establish a high quality, customer centric, service driven,

private Indian Bank catering to the "Future Businesses of India". YES BANK is the

only Greenfield license awarded by the RBI in the last 15 years, associated with the

finest pedigree investors. YES BANK has fructified into a "full service" commercial

Bank that has steadily built Corporate and Institutional Banking, Financial Markets,

Investment Banking, Corporate Finance, Branch Banking, Business and Transaction

Banking, and Wealth Management business lines across the country, and is well

equipped to offer a range of products and services to corporate and retail customers.

YES BANK has been recognized amongst the Top and the Fastest Growing Bank in

various Indian Banking League Tables by prestigious media houses and Global

Advisory Firms, and has received national and international honours for our various

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Businesses including Corporate Finance, Investment Banking, Treasury, Transaction

Banking, and Sustainable practices through Responsible Banking. The Bank has

received several recognitions for our world-class IT infrastructure, and payments

solutions, as well as excellence in Human Capital.

Financial Results

12 months ended Profit & Loss A/C (Standalone)

Value(Rs. in million) FY10A FY11E FY12E

Description 12m 12m 12m

Net Income 23697.10 37061.42 53739.06

Other Income 5755.30 5568.26 6570.54

Total Income 29452.40 42629.68 60309.60

Interest Expended -15817.60 -24831.15 -36435.08

Net Interest Income 13634.80 17798.52 23874.52

Operating Expenses -5001.50 -7264.04 -10586.59

Operating Profit 8633.30 10534.49 13287.92

Provisions &Contingencies -1368.40 -1053.45 -1461.67

Profit before Tax 7264.90 9481.04 11826.25

Tax -2487.50 -3318.36 -4139.19

Profit after Tax 4777.40 6162.67 7687.06

Equity Capital 3396.70 3452.50 3452.50

Reserves 27498.80 19435.07 27122.14

Face Value 10.00 10.00 10.00

EPS 339.67 345.25 345.25

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Quarterly ended Profit & Loss A/C (Standalone)

Value(Rs. in million) 31-Mar-10 (A) 30-Jun-10 (A) 30-Sep-10

(A) 31-Dec-10

(E)

Description 3m 3m 3m 3m

Net Income 6,646.00 7391.90 9537.90 10491.69

Other Income 1,601.40 1438.40 1310.00 1414.80

Total Income 8247.40 8830.30 10847.90 11906.49

Interest Expended -4204.30 -4770.90 -6406.30 -7060.91

Net Interest Income 4043.10 4059.40 4441.60 4845.58

Operating Expenses -1467.40 -1569.90 -1627.50 -1940.96

Operating Profit 2575.70 2489.50 2814.10 2904.62

Provisions &Contingencies -425.60 -125.60 -174.40 -188.80

Profit before Tax 2150.10 2363.90 2639.70 2715.82

Tax -749.80 -800.20 -877.10 -909.80

Profit after Tax 1400.30 1563.70 1762.60 1806.02

Equity Capital 3396.70 3410.20 3452.50 3452.50

Face Value 10.00 10.00 10.00 10.00

Total No. of Shares 339.67 341.02 345.25 345.25

EPS 4.12 4.59 5.11 5.23

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Key Ratios

Particulars FY10A FY11E FY12E

No. of Shares(In Million) 339.67 345.25 345.25

Market Price 329.90 329.90 329.90

EPS (Rs.) 14.06 17.85 22.27

PAT Margin (%) 36.43% 28.42% 24.73%

P/E Ratio (x) 20.16% 16.63% 14.30%

ROE (%) 23.46 18.48 14.82

ROCE (%) 17.87% 33.27% 29.58%

Debt-Equity Ratio(x) 2.52% 4.59% 4.94%

Book Value (Rs.) 11.80 11.40 9.34

P/BV (x) 78.71 53.65 75.28

A-Actual E-Expected

Charts

1. Net Income & PAT

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2. P/E Ratio

3. P/BV

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4. Debt-Equity Ratio

5. RoE & RoCE

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Valuation

At the market price of Rs.329.90, the stock trades at 18.48 x and 14.82 x for the earnings of FY11E and FY12E respectively.

Price to Book Value of the stock is expected to be at 6.15 x and 4.38 x respectively for FY11E and FY12E.

Earning per share (EPS) of the bank for the earnings of FY11E and FY12E is seen at Rs.17.85 and Rs.22.27 respectively for equity share of Rs.10.00 each.

Net Profit for the Sept quarter stood at Rs. 1762.60millions with an increase of 57.78 %.

Total Deposits grew by 106.6% to Rs 40,013.70 crore as at Sep 30, 2010 from Rs 19,365.10 crores at Sept. 30, 2009.

Yes Bank inks with Israel-based investment bank -Poalim Capital Markets to offer advise on cross-border transactions to India and Israel based companies.

The Netherlands-based Rabobank has sold close to 11% stake in private sector lender, Yes Bank.

Yes Bank is the Exclusive Advisor to Sadbhav Infrastructure Project Ltd to raise private equity of Rs 400 crores.

Net Income and PAT of the bank are expected to grow at CAGR of 39 % & 36 % over FY09 to FY12E.

So we recommend ‘BUY’ in this particular scrip with a target price of Rs.379.00 for Medium to Long term investment.

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Industry Overview

The Indian banking system is financially stable and resilient to the shocks that may

arise due to higher non-performing assets (NPAs) and the global economic crisis,

according to a stress test done by the Reserve Bank of India (RBI).

Significantly, the RBI has the tenth largest gold reserves in the world after spending

US$ 6.7 billion towards the purchase of 200 metric tonnes of gold from the

International Monetary Fund (IMF) in November 2009. The purchase has increased the

country's share of gold holdings in its foreign exchange reserves from approximately 4

per cent to about 6 per cent.

In the annual international ranking conducted by UK-based Brand Finance Plc, 20

Indian banks have been included in the Brand Finance® Global Banking 500. In fact,

the State Bank of India (SBI) has become the first Indian bank to be ranked among the

Top 50 banks in the world, capturing the 36th rank, as per the Brand Finance study.

The brand value of SBI increased from US$ 1.5 billion in 2009 to US$ 4.6 billion in

2010. ICICI Bank also made it to the Top 100 list with a brand value of US$ 2.2

billion. The total brand value of the 20 Indian banks featured in the list stood at US$

13 billion.

Meanwhile, loan disbursement from scheduled commercial banks which included

regional rural banks as well posted a growth of 16.04 per cent by March 12, 2010, on

a year-on-year basis, as per the latest data released by RBI. The RBI had earlier

predicted that the credit growth during 2009-10 would be around 16 per cent.

Following the financial crisis, new deposits have gravitated towards public sector

banks. According to RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled

Commercial Banks: September 2009', nationalised banks, as a group, accounted for

50.5 per cent of the aggregate deposits, while State Bank of India (SBI) and its

associates accounted for 23.8 per cent. The share of other scheduled commercial

banks, foreign banks and regional rural banks in aggregate deposits were 17.8 per

cent, 5.6 per cent and 3.0 per cent, respectively.

With respect to gross bank credit also, nationalised banks hold the highest share of

50.5 per cent in the total bank credit, with SBI and its associates at 23.7 per cent and

other scheduled commercial banks at 17.8 per cent. Foreign banks and regional rural

banks had a share of 5.5 per cent and 2.5 per cent respectively in the total bank

credit.

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The report also found that scheduled commercial banks served 34,709 banked

centres. Of these centres, 28,095 were single office centres and 64 centres had 100 or

more bank offices.

The confidence of non-resident Indians (NRIs) in the Indian economy is reviving again.

NRI fund inflows increased since April 2009 and touched US$ 47.8 billion on March

2010, as per the RBI's June 2010 bulletin. Most of this has come through Foreign

Currency Non-resident (FCNR) accounts and Non-resident External Rupee Accounts.

Foreign exchange reserves were up by US$ 1.69 billion to US$ 272.783 billion, for the

week ending June 11, on account of revaluation gains. June 21, 2010.

Major Developments

The Monetary Authority of Singapore (MAS) has provided qualified full banking (QFB)

privileges to ICICI Bank for its branch operations in Singapore. Currently, only SBI

had QFB privileges in country.

The Indian operations of Standard Chartered reported a profit of above US$ 1 billion

for the first time. The bank posted a profit before tax (PAT) of US$ 1.06 billion in the

calendar year 2009, as compared to US$ 891 million in 2008.

Punjab National Bank (PNB) plans to expand its international operations by foraying

into Indonesia and South Africa. The bank is also planning to increase its share in the

international business operations to 7 per cent in the next three years.

The State Bank of India (SBI) has posted a net profit of US$ 1.56 billion for the nine

months ended December 2009, up 14.43 per cent from US$ 175.4 million posted in

the nine months ended December 2008.

Amongst the private banks, Axis Bank's net profit surged by 32 per cent to US$ 115.4

million on 21.2 per cent rise in total income to US$ 852.16 million in the second

quarter of 2009-10, over the corresponding period last year. HDFC Bank has posted a

32 per cent rise in its net profit at US$ 175.4 million for the quarter ended December

31, 2009 over the figure of US$ 128.05 million for the same quarter in the previous

year.

Government Initiatives

The government plans to invest US$ 3.63 billion into public sector banks to aid them

for maintaining their capital adequacy ratio (CAR), as per the Union Budget presented

by the Union Finance Minister in February 2010. Out of the total allocation, US$ 2.1

billion would be used for recapitalisation of the public sector banks during April-June

2010 and US$ 1.5 billion will be invested during the rest of 2010-11.

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The RBI has allowed banks to make changes in the repayment schedules or drawdown

without prior approval from the central bank. However, such a change could be made

on the condition that the average maturity of the loan should remain the same. The

move is expected to make external commercial borrowing (ECB) transactions easier.

Transactions both through automatic and approval routes can take advantage of this

change. Now, without the prior approval of RBI, Indian companies may borrow up to

US$ 500 million in a year.

Further, RBI also allowed domestic scheduled commercial banks to open up their

branches in Tier III to Tier VI regions that have population of up to 49,999 without the

prior permission of the central bank. Banks such as PNB and UCO Bank are planning

to take advantage of this initiative and would open around 440 and 89 branches,

respectively, in such regions.

In its platinum jubilee year, the RBI, the central bank of the country, in a notification

issued on June 25, 2009, said that banks should link more branches to the National

Electronic Clearing Service (NECS). Ideally, all core-banking-enabled branches should

be part of NECS. NECS was introduced in September 2008 for centralised processing

of repetitive and bulk payment instructions. Currently, a little over 26,000 branches of

114 banks are enabled to participate in NECS.

The Monetary Policy Statement 2010-11, dated April 20, 2010, specifies the following

monetary measures:

i. The repo rate has been raised by 75 basis points from 5.25 per cent to 6.00 per

cent with immediate effect.

ii. The reverse repo rate has been raised by 50 basis points from 5.50 per cent to

6.00 per cent with immediate effect.

iii. The cash reserve ratio (CRR) of scheduled banks has been raised by 25 basis

points from 5.75 per cent to 6.0 per cent of their net demand and time liabilities

(NDTL) effective the fortnight beginning April 24, 2010.

Meanwhile, outstanding bank credit in the 15 days up to January 29, 2010 rose by

US$ 4.32 billion, pointing to a revival in credit growth. This is the highest year-on-year

growth recorded since August 14, 2009. Furthermore, the outstanding bank credit in

the 15 days up to February 12, 2010, rose by US$ 4.87 billion to US$ 658.24 billion,

according to data from the Reserve of Bank of India (RBI), marking a 15.07 per cent

year-on-year growth in credit.

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________________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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