BWI: Brickwork Ratings Assigns “BWR AA+” for Yes Bank Limited’s Hybrid Tier I & Upper/Lower Tier II Bonds Issue of INR 590 crores or INR 5.9 billion

Press release from Business Wire India
Source: Brickwork Ratings
Friday, September 25, 2009 10:40 AM IST (05:10 AM GMT)
Editors: General: Consumer interest, Economy; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Stock exchanges
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Brickwork Ratings Assigns "BWR AA+" for Yes Bank Limited's Hybrid Tier I & Upper/Lower Tier II Bonds Issue of INR 590 crores or INR 5.9 billion
Issue Rating: BWR AA+ ; Outlook: Stable

Bangalore, Karnataka, India, Friday, September 25, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AA+ (Outlook: Stable) for Yes Bank Limited's proposed Bonds Issue of Rs 590 crore (Hybrid Tier I Bonds Issue of Rs 90 crore and Upper/Lower Tier II bonds issue of Rs 500 crore), enhanced from Rs 535 crore (Hybrid Tier I bonds issue of Rs 85 crore and Upper/Lower Tier II bonds issue of Rs 450 crore) bonds issue rated in July 09, by Brickwork. The Brickwork Rating "BWR AA+" signifies 'High Safety'. The Rating Outlook further signifies the direction of the rating being stable in the near term.

The rating factored increasing operating profits & returns, asset quality, diversified credit portfolio, strong capital ratio, lean operating structure, and promoters' stake. The rating also factored low CASA deposits, limited network channels, and dependence on bulk deposits. In line with private sector banks, Yes bank has benefited largely from its fee income, pricing power on corporate loan book and repricing of interest sensitive liabilities during the year. As a result, the bank has improved its operating and net profits by 50.7% and 51.9% respectively to reach a level of Rs 527 crore (Rs 350 crore in FY08) and Rs 303 crore (Rs 200 crore in FY08) during FY 09. The bank has extended its good run in the operating profits generation in Q1 FY 10, which has stood at Rs 197.8 crore as compared to Rs 113.8 crore (a growth of 73.9%) for the same period a year ago. Net interest income has increased significantly during the year to achieve a level of Rs 163.7 crore in Q1 FY 10 from the previous level of Rs 113 crore in Q1 FY 09.

The bank's CRAR under Basel II was 16.63%, which is higher than its peers' average of 14.44% as on 31st March 2009, which has further increased to 17.63% in Q1 FY 10. Tier I capital has improved to 10.28% in Q1 FY 10 from the previous level of 9.50% in the FY 09. With comfortable capital adequacy, the bank is poised for significant growth in the current financial year.

The bank is taking exposure only to high quality corporates, and also making prudent provisioning to improve its asset quality as it had suffered a slight deterioration in asset quality in the latter half of FY09. As a result, the bank's asset quality has improved marginally in Q1 FY 10. The bank's gross NPAs have improved from 0.68% in FY09 to 0.48% in Q1 FY 10 (0.21% in Q1 FY 09). Similarly, Net NPAs have dipped from 0.33% in FY 09 to 0.24% in Q1 FY 10 (0.17% in Q1 FY 09). The bank's gross and net NPAs are still lower than the peer group average. However, the bank's total outstanding restructured loans stood at 0.94% of gross advances during quarter.

Bank's net interest margin has improved marginally to 3.1% during Q1 FY 10 from 2.9% for the same period a year ago. The bank was able to achieve a growth in net interest margin by penetrating the large corporate loan market and also optimizing its liability franchise. In addition, the bank has resorted to repricing of a relatively higher proportion of interest rate sensitive liabilities. ROA has improved significantly to 1.8% in Q1 FY 10 from 1.26% in Q1 FY 09. Similarly, the bank has recorded highest return on equity (23.9%) among its peers during the year. Further, the bank's cost to income ratio had come down to 36% in Q1 FY 10 from 42.7% in FY09 (49.4% in FY08) which is significantly lower than its peers' average.

The bank's composition of low-cost deposits to total deposits is the lowest among its peers resulting in its cost of deposits being comparatively very high. With steps being taken by the Bank, it is improving and has increased to 9.5% in Q1 FY 10 from at 8.73% in FY 09. However, the bank's yield on advances is comparatively higher than its peers' average.

Brickwork calculates leverage that assesses bank's capital adequacy with reference to both on and off balance sheet exposures. Yes Bank's lower leverage of 13.92 (14.92 in FY08) is a positive rating factor compared to its peer group leverage of 19.51 in FY09.

Brickwork expects the bank to sustain its growth momentum and ensure healthy earning assets with appropriate risk management practices, and technology driven banking.

Copyright ©, 2009, Brickwork Ratings.

Brickwork Ratings has assigned the rating based on the information obtained from issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents.


CONTACT DETAILS
Dr. A Suresh Kumar, Lead Analyst Contact, Brickwork Ratings, 1-860-425-2742, suresh.kumar@brickworkratings.com
Jubin Pandey, Co-Analyst Contact, Brickwork Ratings, 1-860-425-2742, jubin.p@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, 1-860-425-2742, media@brickworkratings.com
K N Suvarna, Sr. VP - Business Development, Relationship Contact, Brickwork Ratings, 1-860-425-2742, kn.suvarna@brickworkratings.com

KEYWORDS
CONSUMER, ECONOMY, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst, STOCK EXCHANGES

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