Yes bank

Hi guys some more information on the results are as follows

1.Currently their MIX is 54:12:34(retail, SME and corporate). I have always been stressing that banks more towards retail will outperform banks more towards corporate.
Their Retail banking fees is at 586cr highest till date which is up 20% QoQ and 32% YoY. Their Credit card book has grown by 66% YoY and the spends have grown by 70% YOY. Their revenue per customer has grown by 54% YOY though cross selling.

2. They have added close to 500 employee this quarter but their Q0Q expense on salary is flat. Their IT related expense is up by 37% Q0Q and 68% YoY which single headedly takes their entire expense up by 4% Q0Q and 32%YOY.
   This growth in expense is in line with 32% growth in NET INTREST INCOME. Now IT expense acts as an operating leverage in future where you just have to maintain the IT infrastructure and the benefit you get from it is extremely high.
   Their operational efficiency is extremely high when I take a flat IT expense YoY and QOQ.

   How does IT benefit?
   Their Current account has grown by 14% QoQ and 21% YoY. This growth has not been on the back of 1 or 2 large accounts but has been on the back of sustainable growth. Their CASA is flat because of degrowth in savings account which is predominantly because of late deposit rate hike. Actually the ability of a bank to get CASA should always be seen by the ability to get current account as there you cannot offer any interest on deposit. They have opened 3.3 lakh CA account this quarter.

3. The spread between the advances has been shrinking in the recent times because of extremely aggressive rate hike. The bank is confident to take this spread back to the PRE WAR levels which is likely to improve their NIM further.
   Their current yield on advances without the Gross NPA is at 9.5% compared to 8.5% with gross NPA. This shows how good their active loan book is and also shows the stress these legacy asset are putting on the books.

4. They have grown their deposits at 13% YOY where as their cost of deposits are down 10bps YoY. Despite liquidity issue in the next half of the year bank is confident to grow deposits with improving NIM.
   Their borrowing has increased by 20% YoY now here comes the power of credit rating. In a liquidity crunch scenario this shows that they have access to liquidity. This quarter they have raised 3500cr kind of money from borrowing.

5. Their active advance have a PPOP(PRE PROVISION OPERATING PROFIT) to asset of 1.15% and this cost of provision excluding legacy provision is 15bps to 20bps. This means their current ROA on their active book is at 1%.
   Their current credit cost is 50bps to 60bps and bank expects this kind of cost to continue in future. Their current ROA is at 0.4% on overall book but 1% on active book this clearly shows the stress these legacy advances put on the book and how good the bank is doing.

6. Close to 60% of their restructure book is out of moratorium now which is a big risk as of now. They will now need adequate provisioning for this part as per RBI guidelines. This quarter there was 350cr of slippage from this book and 170cr in previous quarter. I will have to further did deeper into this book and see the future possibility of slippage from here as now it is no longer under moratorium which was protecting it form provisioning.

7. Bank is in no hurry to match the industry growth in advances. They are building a good quality advance which can clearly be seen from their slippages which is extremely low and their provisioning requirement for these slippages which is close to 10% only. 95% of their provisioning is for legacy loan which shows what good quality loan book the bank is building. Their RWA is currently at 71% down from 79% a year ago which against shows the improving quality. They expect a 15% YoY growth in advances.

8. They expect at GNPA of 2% and a NET NPA of 1% after asset transfer. The bank is confident of achieving a 0.85% of PPOP to asset but says any delay in expected recovery may lower their FY23 ROA. I think they are referring to reliance infra here. Reliance infra has recently received close to 2000cr kind of money from Delhi metro and they are further going to receive money up to 5000cr. Reliance infra has already won this case against Delhi metro in supreme court. They have recently also filed a case against adani group. They roughly own yesbank 12 thousand cr.

9. Despite a NET profit of 150cr their equity is up by roughly 300cr this is because of 55cr tax and 90cr of recovery from a particular book which they are not allowed to route through profit.

10. Their average daily CA balance is up by 37% YOY and SA balance up by 30% YoY. This shows the quality of CASA and also helps bank manage their liquidity in such scenario.

QUALATATIVE ASPECT AND DIGITAL ASPECT OF BANK

They are turning out to be extremely innovative and aggressively doing more and more tie ups with fin tech and introducing new products in the market. All of this have increased in last 5 months. Since the bank has finalised capital raise and asset transfer now the management is able to focus more towards growth which can clearly be seen from their innovative products.

1. They have introduces special FD at 7.75% and floating rate FD
2. They have opened direct rupee account for transactions with Russia.
3. I have recently read a lot of news of their partnership with FIN TECH. They currently have close to 30 FIN TECH partner. PAGE NO 26 giver further insight.

If I assume a flattish IT spend and provision only for their active book this quarter they would have shown a NET profit of 650cr to 700cr.I feel the bank is not concerned about profit and is building a sustainable business as of now. They are bound to give profits in future because of they showing such good performance in business and on top of this heavy tailwind from the industry.

Disclaimer: I do a lot of trading in this stock because it has a low beta and have an average price 13.64. Considering all the profits booked it comes out to be 12. Currently it is 60% of my portfolio and I expect a CAGR of 20% for the next 3 to 5yrs in the worst case scenario. I might be biased

Thank you