Rabobank sold close to 11% state in Yes Bank

The stock of private sector lender Yes Bank lost 3.51% on Tuesday after Rabobank, its largest shareholder, sold close to 11% stake in the bank.

The stock tanked close to 7% in the morning session after Rabobank cut its stake to 4.90% by selling 3.73 crore shares in bulk deals on the BSE and NSE at a weighted average price of Rs 263.33 per share.

Domestic and foreign institutional investors, including LIC, Birla Mutual Fund, DSP Merill Lynch Mutual Fund and Citigroup Global Markets Mauritius were the buyers.

Rabobank, which is keen to establish its own banking operations in India, has brought down the stake to less than 5% to comply
with the regulations and get the necessary approvals for full banking licence.

Analysts believe the current downtrend in the Yes Bank stock provides a buying opportunity.

The bank did well last fiscal, with its net interest income (NII) jumping 54.7% year on year to Rs 788 crore.

NII is calculated by subtracting the amount of money the bank pays out as interest on liabilities (personal bank accounts, etc) from money it receives as interest on assets (commercial loans and personal mortgages, etc).

The steady growth in NII has been on account of strong growth in advances and investments, and improving margins. The loan growth has been 79% y-o-y while investments grew 43.5%.

The bank, which is focused on corporate banking, has a low current account and savings account (CASA) ratio, at 10.5%. CASA ratio represents the proportion of deposits in such accounts to the total deposits. Again, almost 90% of the CASA deposit is made up of current account deposits from corporates and small and medium businesses.

Going forward, the bank is looking to expand its branch network from 150 branches to 250 by the end of this fiscal and 750 by 2015. This would help improve its CASA ratio.

Yes Bank continues to benefit from its low cost of funds, which stood at 6.9% in FY10 compared with 9% in FY09.

The bank’s net interest margin stood at 3.1% for FY10, which is likely to be maintained more or less. The net profit after tax also jumped 57.2%, reaching Rs 477.7 crore in FY10.

The bank has been able to maintain a healthy asset profile with little concern on asset quality. The bank has gross NPAs at 0.27% and net NPAs at 0.06%. Loan loss provision increased because of increase in provision for standard assets due to high loan growth.

Analysts expect Yes Bank’s loan book to grow at a CAGR of 32% over the next 2-3 years, driven by lending to power, oil and gas, infrastructure and telecom sectors.

At the current market price of Rs 271.80, the stock is trading at 2.99 times its book value as on March 31 and 2.1 times its expected FY12 book value.

Investors can consider entering the stock on further dips with a medium to long term perspective.