BWI: Brickwork Ratings Assigns “BWR AA+” for Yes Bank Limited’s Hybrid Tier I and Upper/Lower Tier II Bonds Issue of INR 5.35 billion

Press release from Business Wire India
Source: Brickwork Ratings
Friday, July 31, 2009 11:16 AM IST (05:46 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 and Upper/Lower Tier II Bonds Issue of INR 5.35 billion
Issue Rating: BWR AA+; Outlook: Stable

Bangalore, Karnataka, India, Friday, July 31, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AA+ (Outlook: Stable) for Yes Bank's proposed Hybrid Tier I bonds issue of INR 0.85 billion and Upper/Lower Tier II bonds issue of INR 4.50 billion. The rating factored increasing operating profits & returns, adequate asset quality, well 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.

The bank has performed well during the financial year 2009 in spite of many challenges witnessed in the macro environment front. 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 INR 5.27 billion (INR 3.50 billion in FY08) and INR 3.03 billion (INR 2.00 billion in FY08) during the year. Similarly, the bank's net interest income has increased significantly during the year to achieve a level of INR 5.11 billion from the previous level of INR 3.30 billion.

Yes Bank has the highest capital adequacy ratio amongst its peers as on 31st March 2009. The bank's CRAR under Basel II was 16.63% higher than its peers' average of 14.44% as on 31st March 2009. The bank added INR 10.6 billion of capital in the form of Hybrid Tier I ,Tier II and retained earnings during FY09, taking the bank's total capital funds from INR 20.72 billion in FY08 to INR 30.67 billion in FY09. The CRAR is expected to improve further with the proposed issue of Hybrid Tier I and Upper/Lower Tier II bonds issue of INR 5.35 billion.

During FY09, the bank's asset quality has declined marginally. As a result, the bank's gross NPAs have increased from 0.11% in FY08 to 0.68%. Net NPAs have increased from 0.09% to 0.33%. However, the bank's gross and net NPAs are lower than the peer group average by 171 bps and 80 bps respectively. Majority of the bank's rated corporate loans have received credit rating of 'A' and above.

During FY09, the bank's net interest margin was 11 bps higher than peers' average. Similarly, the bank's ROA is significantly higher (39 bps) than peers' average of 1.13%. Further, the bank's cost to income ratio had come down to 42.7% in FY09 from 49.4% in FY08. As a result, the bank's cost to income ratio is significantly (5.86%) lower than its peers' average of 48.56%.

The bank's composition of low-cost deposits to total deposits stood at 8.73%, which is considerably lower than peers' average of 25.78% during the year. Consequently, the bank has the highest cost of deposits among its peers as on 31st March 2009. However, the bank's yield on advances is comparatively higher (44 bps) than its peers' average of 11.55%.

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 positive rating factor compared to its peer groups' leverage of 19.51 in FY09. The bank is expected to sustain its envisaged growth plan during the current financial year with improved performance in mobilizing low cost deposits, technology driven banking operations and appropriate risk management practices.

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. Brickwork has the right to change, suspend or withdraw the ratings at any time for any reasons.


CONTACT DETAILS
Dr. A Suresh Kumar, Lead Analyst Contact, Brickwork Ratings, +91 (80) 40409940, suresh.kumar@brickworkratings.com
Jubin Pandey, Co-Analyst Contact, Brickwork Ratings, +91 (80) 40409940, jubin.p@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, +91 (80) 40409940, media@brickworkratings.com
K N Suvarna, Sr. VP - Business Development, Relationship Contact, Brickwork Ratings, +91 (22) 24304902, kn.suvarna@brickworkratings.com

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

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