Result Update | Banks Private Sector | 26 October 2012

Yes Bank Results in line with expectations, Rating changed to Accumulate Key Highlights
Net Profit up 30.2% YoY (5.5% QoQ) for Q2 FY13 The growth in profit was mainly driven by strong net income growth. Net interest income grew by 35.9% YoY (11.0% QoQ) while growth in non-interest income stood at 29.3% YoY (-3.9% QoQ). The growth in NII was mainly driven by robust growth in customer assets (including credit substitutes) at 32.5% YoY (17.1% QoQ) coupled with sequentially expanding NIMs at 2.9% vs 2.8% QoQ. Non-interest income growth was driven by strong growth across all fee income streams. Retain banking fees registered a growth of 113.9% YoY (backed by banks expanding retail franchise). Besides this transaction banking & Financial advisory registered a strong 30.7% YoY & 22.3% YoY growth respectively. Going forward, the management expects the contribution of non interest income to net income to stay in the range of 35%-40%. Reported NIMs improved sequentially by 10 bps to 2.9% as yields on advances remained steady sequentially at 12.4% as against a decline of 30 bps in cost of funds to 8.7%. Going forward the management expects the margins to improve on the back of improving CASA base. Besides this the downward trend in wholesale deposits augurs well for the banks margins going forward. Business growth gains momentum, uptick in CASA continues - Total Business of the bank grew by 20.5% YoY (6.3% QoQ) to `943.1 bn. Advances grew (22.9% YoY, 9.0% QoQ) to `420.2 bn, however including the credit substitutes advances grew healthy at 32.5% YoY (17.1% QoQ) to `540.2 bn. Deposits on the other hand grew by 18.6% YoY (4.1% QoQ). The bank continues to witness strong uptick in CASA balance post deregulation of savings rate by RBI in October. The bank saw an uptick of 1% in CASA balance from 16.3% in Q1FY13 to 17.3% in the current quarter aided by ~29.2% QoQ growth in savings balances while current account balances remained flat. The management expects the CASA share to reach 20% by FY13E. Overall the bank has witnessed strong traction in its retail franchise over the last one year. CASA + Retail Banking FDs has improved to 36.6% of total deposits from 28.6% YoY. We expect the CASA to reach 25.0% by FY14E. Asset quality remained stable during the quarter with gross NPAs at 0.24% (up by 4 bps YoY, decline of 4 bps QoQ) and net NPA at 0.05% (up by 1 bps YoY, decline of 1 bps QoQ). There have been no new restructurings in this quarter. Restructured book at the end of the quarter stood at 0.46% (`1922 mn) of gross advances. Commenting on the banks rd exposure to Deccan chronicle, the management stated that the bank has recovered ~1/3 rd of the total exposure while provided for another 1/3 (~ `500 mn) in the quarter. Its remaining exposure of ~600-650 mn is fully secured through exclusive collateral. As a result of stable asset quality, provisioning expenses during the quarter declined by 16.2% YoY (increase of 5.7% QoQ) which also aided in net profit growth. Banks specific provisioning cover was at 80.4% as at Q2FY13. The bank opened 19 new branches during the quarter taking the total number of branches to 400. Going forward, the bank plans to take its total number of branches to 900 over the next 3 years.
Rating Accumulate Closing Price (`) 416.2 Target Price (`) 459.7 Upside / Downside % 10.4

Source: ABML Research

Company Data
BSE Code NSE Code Equity Capital (` mn) Face Value (`) Market Cap (` bn) Avg Daily Volume 52 week H/L (`)
Source: NSE, BSE

532648 YESBANK 3561.1 10 148.2 3309897 418.3 / 230.5

Shareholding (%)
Holders Promoters FIIs MFs/Banks & FIs Public & Others
Source: BSE

Sep 12 25.90 47.52 14.32 12.26

Jun 12 26.06 42.88 14.16 16.90

Mar 12 26.13 51.35 10.89 11.63

Chart: Yes Bank vs. Sensex

145 Relative Performance 120 95 70 Oct-11 Dec-11 Mar-12 Aug-12 Jan-12 Jun-12 Oct-12 Apr-12 Jul-12

Yes Bank Return

Sensex Return

Source: Capitaline

Analyst Details
Sumit Jatia 022-42333460 sumit.jatia@adityabirla.com

Outlook and Valuations Yes bank reported yet another strong numbers with strong growth in core operations as well as fee income. The bank has so far been successful in building a strong retail franchise. The banks stable asset quality, strong uptick in low cost CASA deposits & superior return ratios bodes well for its future growth. We estimate Yes Bank to report an EPS CAGR of 26.3% over FY12-FY14E. ABV is estimated to grow at 23.2% CAGR during the same period. The stock currently trades at 2.6x FY13E ABV and 2.1 FY14E ABV. We believe the banks valuation adequately factors in its strong fundamentals in the form of consistent operating performance and stable asset quality, thus leaving limited room for upside. We roll our target price to September 13 revising our target price to `459.7 (`418 earlier) valuing the bank at 2.15x its FY14E ABV, implying an upside of 10.4% from current levels. Thus we change our rating from Buy to Accumulate.

Financial Snapshot (` mn)

In ` mn FY12 FY13E FY14E NII 16156 20104 25132 YoY (%) 30 24 25 Operating Profit 15402 20198 25494 YoY (%) 29 31 26 Net Profit 9770 12602 15725 YoY (%) 34 29 25 NIM (%) 2.7 2.7 2.8 EPS (`) 27.7 35.4 44.2 YoY (%) 32 28 25 ABV (`) 132.0 161.3 200.2 RoAE (%) 23.1 24.1 24.3 RoAA (%) 1.5 1.5 1.6 P/E (x) 15.0 11.8 9.4 P/ABV (x) 3.2 2.6 2.1

Source: Company, ABML Research

Aditya Birla Money Limited

2nd Floor, Sheil Estate, Dani Corporate Park, 158 CST Road, Kalina, Santacruz (East), Mumbai 400 098 | Tel: +91 22 42333400

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Result Update | Banks Private Sector | 26 October 2012

Standalone Financial Results Q2 FY13
Particulars (in ` mn) Income Interest Earned Other Income Total Income Expenditure Interest Expanded Operating Expenses Total Expenditure Operating Profit (before provisions) Other Prov. & Contingencies Prov for tax Net profit for the year 14622.1 3161.8 17783.9 4847.4 317.3 1469.3 3060.8 10530.2 2137.6 12667.8 3859.2 378.7 1130.3 2350.2 38.9 47.9 40.4 25.6 -16.2 30.0 30.2 14141.5 3006.8 17148.3 4596.1 300.1 1394.6 2901.4 3.4 5.2 3.7 5.5 5.7 5.4 5.5 19863.7 2767.6 22631.3 14386.5 2140.5 16527 38.1 29.3 36.9 18863.4 2881 21744.4 5.3 -3.9 4.1 Q2 FY13 Q2 FY12 YoY % Q1 FY13 QoQ %

Earning per share Basic (`) Diluted (`)

Source: Company data, ABML Research

8.6 8.4

6.7 6.6

27.9 28.7

8.2 8.0

5.0 5.2

Key Ratios
Particulars (in ` mn) Deposits (` bn) Advances (` bn) NIM (%) ROAE (%) CD Ratio (%) Gross NPA (%) Net NPA (%) Provision Coverage (%) Cost to Income (%) CAR (%) Tier 1 (%)
Source: Company data, ABML Research * Reported

Q2 FY13 522.9 420.2 2.9* 23.8* 80.4 0.24 0.05 80.4 39.5 17.5 9.5

Q2 FY12 440.8 341.9 2.9* 22.6* 77.6 0.20 0.04 80.2 37.4 16.0 9.4

YoY % 18.6 22.9 0 bps 120 bps 278 bps 4 bps 1 bps 20 bps 208 bps 150 bps 10 bps

Q1 FY13 502.1 385.3 2.8* 24.0* 76.7 0.28 0.06 78.3 39.5 16.5 9.2

QoQ % 4.1 9.0 10 bps -20 bps 361 bps -4 bps -1 bps 210 bps -7 bps 100 bps 30 bps

Recommendation summary
Date 17-Jan-11 24-Jan-11 25-Apr-11 11-Aug-11 28-Oct-11 25-Jan-12 11-May-12 26-July-12 26-Oct-12 Reports Initiating Coverage Result Update (Q3FY11) Result Update (Q4FY11) Result Update (Q1FY12) Result Update (Q2FY12) Result Update (Q3FY12) Result Update (Q4FY12) Result Update (Q1FY13) Result Update (Q2FY13) Rating Buy Buy Accumulate Buy Accumulate Accumulate Buy Buy Accumulate Closing Price (`) 260.2 269.7 317.5 306.8 308.1 319.4 326.5 346.1 416.2 Target Price (`) 335.3 335.3 362.6 355.4 345.0 353.9 398.5 418.0 459.7 Upside % 28.9 24.3 14.2 15.9 12.0 10.8 22.1 20.8 10.4

Source: ABML Research

Aditya Birla Money Limited

2nd Floor, Sheil Estate, Dani Corporate Park, 158 CST Road, Kalina, Santacruz (East), Mumbai 400 098 | Tel: +91 22 42333400

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Result Update | Banks Private Sector | 26 October 2012

Standalone Financials Yes Bank Income Statement

Financial Year (in ` mn) Net Interest Income Growth (%) Other Income Net Income Operating Expenses Operating Profit (pre-prov) Other Prov. & Contingencies Profit Before Taxes Prov for tax Net profit for the year Growth (%) FY11 12469 58 6233 18702 6798 11904 982 10922 3650 7271 52 FY12 16156 30 8571 24728 9325 15402 902 14500 4730 9770 34 FY13E 20104 24 12409 32513 12315 20198 1494 18704 6102 12602 29 FY14E 25132 25 15960 41092 15597 25494 2156 23338 7613 15725 25 Asset Quality Gross NPA to Advances Net NPA to Advances Provision Coverage Slippage Ratio FY11 FY12 FY13E FY14E 0.23% 0.03% 88.6% 0.2% 0.22% 0.05% 79.2% 0.2% 0.30% 0.07% 78.0% 0.3% 0.40% 0.09% 78.0% 0.3%

Key Ratios
Financial Year (in ` mn) Return Ratios Average Yield on Advances Average Cost of Deposits NIM Non Int Income / Net Income Return on Avg Equity Return on Avg Assets 10.6% 6.6% 2.9% 33.3% 21.1% 1.5% 12.2% 8.1% 2.7% 34.7% 23.1% 1.5% 12.1% 7.9% 2.7% 38.2% 24.1% 1.5% 11.6% 7.2% 2.8% 38.8% 24.3% 1.6% FY11 FY12 FY13E FY14E

Balance Sheet
Financial Year (in ` mn) Sources of Funds Capital Reserve and Surplus Net Worth Deposits Growth (%) Borrowings Other Liabilities and Prov. Total Liabilities 3472 34469 37941 459389 71 66909 25831 590070 3530 43236 46766 491517 7 141565 56773 736621 3561 54172 57734 584905 19 217936 58267 918841 3561 68231 71792 701886 20 246362 60423 1080463

Efficiency Ratios Business Per Emp. (in mn) Net Profit Per Emp. (in lakh) Business Per Branch (in mn) Cost / Income Ratio 204.4 18.5 3752.5 36.3% 154.4 17.3 2447.8 37.7% 145.7 17.6 2215.2 37.9% 134.3 16.9 2015.1 38.0%

Business Ratios Credit Deposit Ratio 74.8% 41.0% 10.3% 77.3% 56.5% 15.0% 78.0% 60.0% 20.0% 78.0% 57.0% 25.0%

Application of Funds Cash and balances with RBI Bal. with banks & call money Investments Advances Growth (%) Fixed assets Other assets Total Assets 30760 4200 188288 343636 55 1324 21861 590070 23325 12530 277573 379886 11 1771 41535 736621 43011 14830 350943 456226 20 1913 51918 918841 48645 17094 400075 547471 20 2280 64898 1080463

Investment Deposit Ratio CASA Ratio Valuations Ratio EPS P/E (x) BVPS P/BV (x) Adj. BVPS P/ABV (x)

20.9 19.9 109.3 3.8 109.0 3.8

27.7 15.0 132.5 3.1 132.0 3.2

35.4 11.8 162.1 2.6 161.3 2.6

44.2 9.4 201.6 2.1 200.2 2.1

Source: ABML Research, company data

Aditya Birla Money Limited

2nd Floor, Sheil Estate, Dani Corporate Park, 158 CST Road, Kalina, Santacruz (East), Mumbai 400 098 | Tel: +91 22 42333400

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Result Update | Banks Private Sector | 26 October 2012

Research Team
Vivek Mahajan Head of Research 022-42333522 vivek.mahajan@adityabirla.com Hemant Thukral Head Derivatives Desk 022-42333483 hemant.thukral@adityabirla.com

Fundamental Team
Avinash Nahata Akhil Jain Sunny Agrawal Sumit Jatia Shreyans Mehta Dinesh Kumar Pradeep Parkar Head of Fundamental Desk Metals & Mining/Mid Caps FMCG/Cement/Mid Caps Banking & Finance Construction/Real Estate Information Technology/Auto Database Analyst 022-42333459 022-42333540 022-42333458 022-42333460 022-42333544 022-42333531 022-42333597 avinash.nahata@adityabirla.com akhil.jain@adityabirla.com sunny.agrawal@adityabirla.com sumit.jatia@adityabirla.com shreyans.m@adityabirla.com dinesh.kumar.k@adityabirla.com pradeep.parkar@adityabirla.com

Quantitative Team
Rizwan Khan Jyoti Nangrani Raghuram Rahul Tendolkar Amit Somani Technical and Derivative Strategist Sr. Technical Analyst Technical Analyst Derivatives Analyst Derivative Analyst 022-42333454 022-42333454 022-42333537 022-42333532 022-42333532 rizwan.khan@adityabirla.com jyoti.nangrani@adityabirla.com raghuram.p@adityabirla.com rahul.tendolkar@adityabirla.com amit.somani@adityabirla.com

Advisory Support
Indranil Dutta Suresh Gardas Sandeep Pandey Advisory Desk HNI Advisory Desk Advisory Desk 022-42333494 022-42333535 022-30004011 indranil.dutta@adityabirla.com suresh.gardas@adityabirla.com sandeep.pandey@adityabirla.com

ABML research is also accessible in Bloomberg at ABMR

Aditya Birla Money Limited

2nd Floor, Sheil Estate, Dani Corporate Park, 158 CST Road, Kalina, Santacruz (East), Mumbai 400 098 | Tel: +91 22 42333400

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Result Update | Banks Private Sector | 26 October 2012

Our Rating Methodology

Stock Ratings Buy Accumulate Neutral Reduce Sell Absolute Returns (R) R > 15% 5% < R 15% -5% < R 5% -10% < R 5% R -10%

Disclaimer:
This document is not for public distribution and is meant solely for the personal information of the authorised recipient. No part of the information must be altered, transmitted, copied, distributed or reproduced in any form to any other person. Persons into whose possession this document may come are required to observe these restrictions. This document is for general information purposes only and does not constitute an investment advice or an offer to sell or solicitation of an offer to buy / sell any security and is not intended for distribution in countries where distribution of such material is subject to any licensing, registration or other legal requirements. The information , opinion, views contained in this document are as per prevailing conditions and are of the date of appearing on this material only and are subject to change. No reliance may be placed for any purpose whatsoever on the information contained in this document or on its completeness. Neither Aditya Birla Money Limited (ABML) nor any person connected with it accepts any liability or loss arising from the use of this document. The views and opinions expressed herein by the author in the document are his own and do not reflect the views of Aditya Birla Money Limited or any of its associate or group companies. The information set out herein may be subject to updating, completion, revision, verification and amendment and such information may change materially. Past performance is no guarantee and does not indicate or guide to future performance. Nothing in this document is intended to constitute legal, tax or investment advice, or an opinion regarding the appropriateness of any investment, or a solicitation of any type. The contents in this document are intended for general information purposes only. This document or information mentioned therefore should not form the basis of and should not be relied upon in connection with making any investment. The investment may not be suited to all the categories of investors. The recipients should therefore obtain your own professional, legal, tax and financial advice and assessment of their risk profile and financial condition before considering any decision. Aditya Birla Money Limited, its associate and group companies, its directors, associates, employees from time to time may have various interests/ positions in any of the securities of the Company(ies) mentioned therein or be engaged in any other transactions involving such securities or otherwise in other securities of the companies / organisation mentioned in the document or may have other potential conflict of interest with respect of any recommendation and / related information and opinions. Analyst holding in the stock: NIL

Aditya Birla Money Limited

2nd Floor, Sheil Estate, Dani Corporate Park, 158 CST Road, Kalina, Santacruz (East), Mumbai 400 098 | Tel: +91 22 42333400

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