Bank Results season (India Earnings) : Yes Bank starts back from 390 levels despite overnight straits

Yes Bank covered a lot of ground after publishing results yesterday, as the Net Interest Income jumped 2 in 5 on year or net profits increased more than 10% sequentially on INR 0.94 Bln in Investment gains on bonds /debt . The NII of INR 65.9 Bln was sufficiently larger by our benchmarks as the bank remains one of the few posting robust gains in Fee Income and advisory income including retail charges as at bigger brother HDFC Bank, the lines have gone relatively stale on such income in the Indian scenario.

Other Income was INR 44.2 Bln looking to equal contributions from NII going ahead as is the wont of this income stream in robust bank models. While private banks set quite a standard for robust corporate governance without due transparency in such old habits in Indian Banking a s a consolidated other income figure unexplained, the reforms in banking would still have covered more ground than it is internationally. the higher interest savings led CASA increase to 20% at the bank is still miles away from reaching an entrenched player status but that is just a n indicator of this bank’s potential to grow faster and stronger than the ICICI Banks and the HDFC Banks.

Retail assets remain a priority  at the bank with total book still ahead of other “midcaps” as Kotak and indusind dependent on corporate treasuries ( variously wholesale deposits/short funding linked to the usurius 10% = call rates pushed by RBI’s interim policy) with assets of INR 612 Bln

The yields, cost of funds a dynamic provision coverage shared by the bank(click here) continue to reflect the continuing profitability of the bank’s model and its relative closeness to NBFC models in vogue, currently trying to reprocess themselves as banks but the existing players will settle up much higher in any status ranking of the candidates yet remaining a respectful outsider in loan syndicates and loan melas

 

Defining the new YES Bank

Finally, the cat is out of the bag. 
Yes Bank albeit a little late or cautious, 
has decided to step into the Institutional market. It will be asking investors to pick up a $250m QIP stake to shore up its capital. In the meantime, as reported earlier, they have also put on hold their diversification and market development plans on the board for the last 2 years now as they get into some serious consolidation in its core banking business. They have a good sleeping brand and their recent cost cutting efforts would also bear fruit. However, their focus on SME business might change now as the current ticket size is very unremunerative for them. There was some recent murmur when Rabobank announced its plans to enter the country directly, but that is a non-starter since Yes Bank would not go for the stake sale by Rabobank without making sure the house is in order as a deeper recession is equally likely in the next 12 months.

Yes would need a little serious selling with big ticket business while continuing to present simple and generous options for retail and SME customers. Their non presence in asset management and broking would hardly raise any eyebrows as the business entirely survives on institutional volumes and even a Kotakstreet and a sharekhan are essentially struggling with their current “low” period.
I wonder how any bank with a brand like Yes can today crack open the expat market which has a few relatively unknown niche players ( Geojit, recently acquired by HSBC) It would need key leadership experience to realise a valid entry point. One option however, at the barest minimum requirement, is to go for a PSB or a local bank in UK and Australia or the Middle east. That requires capital but any other option leaves you with a performance like ICICI Bank which has managed only rep offices in all its overseas expansion and have not been able to generate the required trust without a retail presence on the ground, leaving the field seemingly open for players like ING and HSBC.
Regulatory level liaison with developed markets would sadly continue to maintain the respectable disconnect that exists as emerging markets can barely acknowledge their requirements of the day as they are seemingly extended to the rest of the world. It remains to be seen if that home brewn recipee of the Basel and BoE would ever land in some drifting current and be taken care of. A way must be found for India to spare the cash and show their value in the developed world and invest in these international markets before much more will come out to bear on market shares of all the players. This is not to belittle current efforts from either side but I didn’t see it on the agenda in these last few years at work. It is never too late to start?
The scrip remains a good buy in Indian exchanges and I look forward to even more QIP issuance from YES Bank.

Posted via email from The investment blog on Post

Rejuvenating Banking after the crash of ’08

I wonder how any bank with a brand like Yes or Kotak can today crack open the expat market which has a few relatively unknown niche players ( Geojit, recently acquired by HSBC) It would need key leadership experience to realise a valid entry point. One option however, at the barest minimum requirement, is to go for a PSB or a local bank in UK and Australia or the Middle east. That requires capital but any other option leaves you with a performance like ICICI Bank which has managed only rep offices in all its overseas expansion and have not been able to generate the required trust without a retail presence on the ground, leaving the field seemingly open for players like ING and HSBC. They do have some presence now in London.
 
Regulatory level liaison with developed markets would sadly continue to maintain the respectable disconnect that exists as emerging markets can barely acknowledge their requirements of the day as they are seamlessly extended to the rest of the world. It remains to be seen if that home brewn recipe of the Basel and BoE would ever land in some drifting current and be taken care of. A way must be found for India to spare the cash and show their value in the developed world and invest in these international markets before much more will come out to bear on market shares of all the players. This is not to belittle current efforts from either side but I didn’t see it on the agenda in these last few years at work. It is never too late to start?
 
All the PSB scrips remains a good buy in Indian exchanges and I look forward to even more QIP issuance from YES Bank. But sooner than later the investing denizens will realize our SME status in the global market and unlike China, here Private Enterprise is free to make its own market rules, which is not something we have made good use of till now.
 
The other priority and now a key priority is of course our spreading into the hinterland as we strengthen distribution and support the microcredit revolution and the farmers. This spread would require immediate action by the banks as the government has al but given the keys to the treasury for the banks to lend and spend and while Corporate credit may be lukewarm, the hinterland beckons.
 
Last but not the least, the banks are key to the Indian consumer treasure now that it is all about lifestyle and disposable spending. While unsecured credit would not be remunerative, as we cannot go beyond the current systemized and sometimes too painfully detailed back office ops required to support the credit.
 
As a banker I probably wonder why the boom did not last, but then nothing lasts forever and as far as emerging markets are concerned , it remains a s good as it gets as Class B towns and Metros keep growing incessantly and people continue to spend on retail, lifestyle and entertainment. Infrastructure financing will attract the big bucks and the retail lifestyle spending will grow as fast as ever within the next 12 months, the magic being in access and prompt delivery by the banks.
 
Predictions: Interest rates are headed lower and Treasuries are going to be fatter and richer but still incomparable to the riches in the global markets
 
[Category India]
[Tags India infrastructure, Banking, Bank stocks, Wealth, Retail Lifestyle, Amitonomics, Lifestyle Economy, India, Economy, Finance]
 
Amit Mittal
mittalster@gmail.com
 
Amit Mittal
Mob: 919972442877
amit.mittal@me.com
MD, Advantage Research Pvt Ltd
@Innovative Film City, Bidadi 562109
On the web Advantage ‘zyaada’ http://advantages.us/zya
http://astore.amazon.com/mmmzyaada-20

Posted via email from The investment blog on Post

Up ↑

%d bloggers like this: