Financial analysis of yes bank by Saurabh Kumar +91 9990415104

FSA

FINANCIAL ANALYSIS YES BANK

This document carries the comprehensive of YES Bank Corporation

Saurabh Kumar

FORTUNE INSTITUTTE OF INTERNATIONAL BUSINESS

INTODUCTIONYes Bank is a “Full Service Commercial Bank”. It is a fourth largest private Banks in India. This report will throw light on the financial performance of YES Bank of the last five years. The report has been prepared based so the certain essential parameters which have seen selected from the financial statements of the company. The reason of selection was they are the most suitable parameter on which a bank can be analyzed comprehensively.

The history of banks dates back to the fourteenth century in the wealthy cities of the renaissance Italy. Throughout history hundreds of banks came into existence however their main objective has remained the same ‘to link together customers that have capital deficits and customers with capital surpluses’. Based upon this principles banks have came up with innovative products and services fulfilling the demands of time and coping with the changes of globalization in the twentieth and twenty-first centuries.

The history of Yes Banks is that it was founded in 2004 by Rana Kapoor. Yes Bank is the only Greenfield Bank licence awarded by the RBI in the last two decades. Yes Bank has steadily built a Corporate, Retail & SME Banking franchise, Financial Markets, Investment Banking, Corporate Finance, Branch Banking, Business and Transaction Banking, and Wealth Management business lines across the country.

Yes Bank has been recognized amongst the Top and Fastest Growing Banks in various Banking League Tables by prestigious media houses and Global Advisory Firms, and has received several national and international honours for various business including Corporate Investment Banking, Treasury, Transaction Banking, and Sustainable practices through Responsible Banking.

Yes Bank provide our corporate clients with a complete suite of investment and Banking Services both India and internationally, in collaboration with our financial partners. Yes Bank is steadily evolving as the professionals, Bank of India with long term mission of “Building the Finest Quality Bank of the World in India” by 2020.

FINANCIAL ANALYSISIn the following analysis, YES Bank has been independently analyzed at first and then its performance has been compared with all the Private Banks in India. YES Bank, being a commercial bank has also been compared with rest of the commercial banks in India which eventually made our conclusion more concrete. The consolidated statements consisting of most significant parameter on which banks have been compared can be seen in the annexure section. The data collected is of last 5 years i.e. from FY 2008-2013. The various parameters have been sequentially explained below:

No of Banks: - The Number of Banks in the category Commercial Bank is highest amongst all the different sector banks like Public Sector Bank, Private Sector Bank etc in India. The no. of banks in the Commercial Sector stood at 89 in the FY 2013 as compared to 20 & 26 in private sector banks and public sector banks respectively. Hence, we can infer that the Commercial Sector banks are expanding at a much more rapid pace as compared to private and public sector banks.

2008-09 2009-10 2010-11 2011-12 2012-13

0

10

20

30

40

50

60

70

80

90

100

80 81 8187 89

27 27 26 26 2622 22 21 20 20

No of Banks

Commercial BanksPublic Sector BanksPrivate Sector Banks

No of Offices: -

The number of offices of YES Bank in the last five years hasn’t experienced a substantial increase. The number of offices in the year 2008 stood at 118 which got at 428 in year 2012-13. As we are seeing that banks has been rapidly increasing offices .The fact is that company is want to expand business in new region through great service.

2008-09 2009-10 2010-11 2011-12 2012-13

118 151215

357428

No of OfficesYes Bank

No of Employees: -

As we are seeing in the graph of Yes Bank in FY 2008-09 no of employees is 2671 to FY 2012-13 is 7024. Bank increased employee by 62% within five years. We see that company has tryning to expend branches as well as employee.

2008-09 2009-10 2010-11 2011-12 2012-130

1000

2000

3000

4000

5000

6000

7000

8000

2671 29063929

5642

7024

Yes Bank

Business per Employee: -

As seen from the table below, the business per employee has increased from year 2008-09 is 98.84 to year 2012-13 is177.74. In FY 2010-11 is business per employee is 222.03 but after that business per employee has been reduced. When we compared last two year that company has been increased some percentages now company is trying to increase branches along with business per employee

2008-09 2009-10 2010-11 2011-12 2012-130.00

50.00

100.00

150.00

200.00

250.00

Business per employee

Axis Title

Profit per Employee:-

As seen from the table below, Profit per employee had been increased by 45% within year 2008-09 to 2010-11. In FY 2011-12 profits per employee has been decline approx 3% and in year 2013 has been increased. Over all within five year company has been increase profit per employee by 46%.

2008-09 2009-10 2010-11 2011-12 2012-130.00

0.50

1.00

1.50

2.00

2.50

1.14

1.682.09 2.04 2.10

Yes Bank

Capital and Reserves & Surplus: -As seen from the table below, capital and reserve surplus increased in year 2009-10 by 48%. In year 2010-11 to 2012-13 capital and reserve surplus has been increase consistently. This shows that the company has been regularly putting the profits after distribution back into the reserves and surplus. Within five year capital and reserve surplus increased by 73%.

2008-09 2009-10 2010-11 2011-12 2012-13

16242

3089637941

4676658077

Capital and Reserves & Surplus Yes Bank

Deposits: - As we seeing that deposits has been increased by 76% in within five years. In FY 2010-11 deposits have been increased rapidly that means 48%. After that in

year 2010-11 and 2011-12 has been increased by slightly that is 7%. In last year Deposits has been increased by 27%. As we know deposits forms the major part of Liability of the balance sheet for the

banks and it has been increased hugely.

2008-09 2009-10 2010-11 2011-12 2012-130

100000

200000

300000

400000

500000

600000

700000

161694267986

459389 491517

669556

Yes Bank

Investment:-

As seen below in the chart, investment has been increased tremendously in within five year.

As we know yes bank is a new private banks, and it wants to expand business rapidly. Within five year investment has been increased by approx 84%. In last year 2012-13 investment has been by 35%.

2008-09 2009-10 2010-11 2011-12 2012-130

50000

100000

150000

200000

250000

300000

350000

400000

450000

71170102099

188288

277573

429760

Yes Bank

Interest Income:-

As seen from the table below interest income has been increase rapidly in within five years.

Interest Income is generally derived from the loans given to customers and companies.

In year 2002-09 to 2009-10 interest income has been increased slightly by 16%. In FY 2010-11 to 2012-13 interest income has been increased constantly in high ratio. Over all in within five years interest has been increased by 76%.

2008-09 2009-10 2010-11 2011-12 2012-130

10000

20000

30000

40000

50000

60000

70000

80000

90000

20014 23697

40417

63074

82940

Yes Bank

Other Income:-

As seen from the table below, other income has been increasing. In three years 2008-2010 other income has been increased constantly. In last two years other income has been increased rapidly that is 51%. Over all in within five year other incomes growth is 66%.

2008-09 2009-10 2010-11 2011-12 2012-130

2000

4000

6000

8000

10000

12000

14000

Yes Bank

Axis Title

Operating expenses:-

As seen from the table below, we see that operating expenses has been increasing constantly.

In last year operating expenses has operating has been increased by 31%. Over all in within five year increased operating expenses by 69%. High operating expenses points towards inefficient management practices.

2008-09 2009-10 2010-11 2011-12 2012-130

2000

4000

6000

8000

10000

12000

14000

4185 50026798

9325

13345

Yes Bank

Return on Equity:-

As we seen below in the graph, Return on equity of yes Bank is increasing consistently.

As we know Return on Equity = Net Income/Shareholder's Equity. In within five years return on equity increased by approx 27%. Increasing return on equity is a good sign for the YES Bank.

2008-09 2009-10 2010-11 2011-12 2012-130

5

10

15

20

25

20.65 20.27 21.1323.07

24.81

Yes Bank

Return on Assets:-

As seen from the table below, ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets. ROA is displayed as a percentage.

In year 2008-09 to 20009-10 ROA is increased by approx 21%. In last three years ROA has been decline.

2008-09 2009-10 2010-11 2011-12 2012-131.45

1.50

1.55

1.60

1.65

1.70

1.75

1.80

1.59

1.79

1.58 1.57 1.57

Yes Bank

Capital Reserve Adequacy Ratio:-

Capital Adequacy ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. It determines the capacity of the bank in terms of meeting the time liabilities and other risks such as credit risk, operational risk. We see that over the years, CRAR has increased by 10.30% which implies the stability and efficiency of the firm. But, looking at the trend of CRAR we infer that bank has become vulnerable to meeting of liabilities.

2008-09 2009-10 2010-11 2011-12 2012-130.00

5.00

10.00

15.00

20.00

25.00

16.6020.60

16.50 17.90 18.30

Yes Bank

Net NPA Ratio: -

As seen from the table below, NPA Ratio has decreased over the year which is a good sign for the company. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. The decline registered in the NPA shows that the assets in the jeopardy of default has reduced over the years which also ensures that company is no longer paying any extra interest or principal payment.

2008-09 2009-10 2010-11 2011-12 2012-130.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.33

0.060.03 0.05

0.01

Yes Bank

COMPARISON WITH PRIVATE BANKS AND COMMERCIAL BANKSNumber of Offices

Items 2008-09 2009-10 2010-11 2011-12 2012-13Yes Bank 118 151 215 357 428Private Banks 4336 5243 7007 8297 9718Commercial Banks 67562 72906 78215 85262 92114

2008-09 2009-10 2010-11 2011-12 2012-130

100002000030000400005000060000700008000090000

100000

118 151 215 357 4284336 5243 7007 8297 9718

6756272906

7821585262

92114

No of Offices

Yes Bank

Private Banks

Commercial Banks

The trend seen from the table above shows, the percentage increase in Number of offices has been the 36% for commercial banks, 55.39% for private banks, and 72.73% for YES Banks.

Hence, we can infer YES Bank expand its market as compared to other private banks and the commercial banks.

YES Bank currently is growing at a higher rate as compared to other competitive banks

Number of Employees


2008-09 2009-10 2010-11 2011-12 2012-130

200000

400000

600000

800000

1000000

1200000

51341 55052 55380 62589 66208

193578 188332 217953 248284 269941

954684 9559901001096

10485201096984

No of Employees

Yes BankPrivate BanksCommercial Banks

The trend seen from the table above shows, the percentage increase in Number of employees has been the 67.67% for commercial banks, 29.29% for private banks, and 22.96% for YES Banks.

Hence, we can infer YES Bank expands its market but no of employee as compared to other private banks and the commercial banks is low.

Here we can say that YES Bank is trying to reduce its costs.

Business per Employee

Items 2008-09 2009-10 2010-11 2011-12 2012-13Yes Bank 98.84 162.38 222.03 174.77 177.42Private Banks 67.76 77.27 82.60 86.23 94.06Commercial Banks 73.98 86.23 99.03 109.95 121.33

2008-09 2009-10 2010-11 2011-12 2012-130.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

98.84

162.38

222.03

174.77 177.4267.76

77.27

82.60

86.23 94.0673.98

86.23

99.03109.95

121.33

Business per Employees

Commercial BanksPrivate BanksYes Bank

The trend seen from the table above shows, the percentage increase in Business per employee has been the 59.03% for commercial banks, 28% for private banks, and 44.30% for YES Banks.

Hence, we infer that YES Bank is higher than private banks in Businees per employee but in comparison to commercial is low.

It also reflects that the employees of the company are profitable enough that they are able to make significant contribution to it.

Profit Per Employee


2008-09 2009-10 2010-11 2011-12 2012-130.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1.14

1.682.09 2.04 2.10

0.56

0.70

0.81 0.921.07

0.55

0.60

0.70 0.780.83

Profit per Employee


As seen from the table & graph above, we the percentage increase registered is 47.67% in Private Bank, 45.72% in YES Bank and 50.9% in Commercial Banks.

Hence , we infer that YES Bank is performing the below in comparison to commercial Banks and Private Banks

Capital and Reserves & Surplus


2008-09 2009-10 2010-11 2011-12 2012-130

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

10000000

16242 30896 37941 46766 58077

996686 1199839 1385664 15929521929461

3679473

4301613

5099192

6085618

7089300

Capital & Reserve surplus


As seen from the table above, we infer that the Capital Reserves & Surplus has increased for YES Bank is negligible.

The percentage increase in Capital & Reserve surplus has been the 49.10% for commercial banks, 48.34% for private banks, and 44.30% for YES Banks.

Hence, we infer that increasing percentage is more or less same to commercial Banks and Private Baks.

Interest Income


2008-09 2009-10 2010-11 2011-12 2012-130

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

10000000

20014 23697 40417 63074 82940850714 828064 967131

13455551664864

3884816 4151786

4913407

6552839

7636115

Interest Income


As seen from the table above, we infer that the interest income earned by the banks has increased consistently over the years. The rise in interest income suggests that the banks have operated well and have very well maintained their customer base along with increasing it. A lower interest income puts pressure on the profitability on the customer since this is the major source of income for the banks.

The increase amongst all three banks have been registered at 75.87% in YES Bank, 48.91% in Private Banks and 96.5% in commercial banks which suggests that commercial banks have been the most successful amongst all the three.

Other Income


2008-09 2009-10 2010-11 2011-12 2012-130

200000

400000

600000

800000

1000000

1200000

1400000

4369 5755 6233 8571 12574

178602 204231 208734 250480297927

752204792676 798501

863437

977866

Other Income


As seen from the table above, we infer that the other income increase amongst all three banks have been registered at 65% in YES Bank, 40% in Private Banks and 23% in commercial banks.

Hence , other income of commercial bank is very negligible and YES Bank’s other income is higher among the three.

Operating Expenses


2008-09 2009-10 2010-11 2011-12 2012-13

0

500000

1000000

1500000

2000000

2500000

4185 5002 6798 9325 13345217794 228510 276064 340301 404851

8958141000279

12314031375720

1565855

Operating Expenses


As seen from the above table, we see that the pattern of operating expenses as seen in YES Bank is also followed by the industry. The operating expenses have increased by 68.64% in YES Bank, 46.30% in Private Banks and 74.71% in Commercial Banks.

Hence, we infer that yes bank operating expenses is low among the industry commercial Bank and Private Banks.

That is good sign for company .

Return on Equity


2008-09 2009-10 2010-11 2011-12 2012-130

10

20

30

40

50

60

20.65 20.27 21.1323.07 24.81

11.38 11.9413.70

15.2516.47

15.44 14.3114.96

14.6013.84

Return on Equity


As we know that, Return on Equity = Net Income/Shareholder's Equity, ROE for Commercial Banks shows a decline in the past five years whereas the trend of HSBC Bank and Foreign Banks shows a considerable increase over the year

The decline in ROE suggests that Commercial Banks haven’t been able to sustain their Net Income as a result

As we see that YES Bank is among top among industry and private Banks.

Return on Assets


2008-09 2009-10 2010-11 2011-12 2012-130.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1.591.79

1.58 1.57 1.57

1.131.28 1.43 1.53 1.63

1.131.05 1.10 1.08 1.03

Chart Title


As we seeing above that ROA of YES Bank is decline overall in five years by 2%. ROA OF Private Banks is increased by 31% and commercial Banks is declining by

8.85%. Declining percentage in ROA means that the bank hasn’t been able to utilize its

assets.

Capital Reserve Adequacy Ratio


2008-09 2009-10 2010-11 2011-12 2012-130.00

5.00

10.00

15.00

20.00

25.00

16.60

20.60

16.5017.90 18.30

15.23

17.4316.46 16.21 16.84

13.97 14.54 14.19 14.24 13.88

CAAR


Capital Adequacy ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. It determines the capacity of the bank in terms of meeting the time liabilities and other risks such as credit risk, operational risk.

We see that CRAR has increased for the Private Banks too along with YES Bank in the last five years whereas it has shown a constant trend for Commercial Banks.

Thus, we infer that Private Banks are safer to invest in as compared to the commercial banks since their risk of default is relatively high.

Net NPA Ratio


2008-09 2009-10 2010-11 2011-12 2012-130.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

0.33

0.06 0.03 0.05 0.01

1.29

1.04

0.560.46

0.52

1.051.12

0.97

1.28

1.68

Net NPA Ratio


Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset.

As also explained above, YES Bank has done exceptionally well in maintaining the NPA ratio. Also, Private Banks have also done a good job in reducing the NPA in the last five years. Since NPA’s becomes a liability on the banks end, thus it becomes necessary to get rid of them.

The percentage decrease registered in all the three banks over the last five years is 59.69% in private Banks, 320% in YES Bank. On the other hand, it has increased for commercial banks by 60% which is a sign of threat.

Also, it shows that commercial banks must be making lot of losses because of bad debts caused due to non-payment of loans which the borrowers have taken from them.

Financial analysis of yes bank by Saurabh Kumar +91 9990415104

Economy & Finance

Transcript of Financial analysis of yes bank by Saurabh Kumar +91 9990415104