RBL Bank, YES Bank, Lakshmi Vilas Bank hit record high

Shares of three private sector banks – YES Bank, RBL Bank and Lakshmi Vilas Bank – have hit their respective record highs, gaining up to 7.5% on BSE in intra-day trade on Monday.

Thus far in the calendar year 2017, RBL Bank (up 79%), YES Bank (38%) and Lakshmi Vilas Bank (23%) have outperformed the market by gaining more than 20%. In comparison, the S&P BSE Sensex was up 11.5% during the period.

RBL Bank has made it to the list of top 10 most valuable banks in terms of market captialisation after a strong run-up in the stock price. With the m-cap of Rs 22,041 crore at 12:08 pm, RBL Bank stands ahead of IDFC Bank (Rs 20,632 crore), Central Bank of India (Rs 19,735 crore), Canara Bank (Rs 18,238 crore) and IDBI Bank (Rs 15,523 crore), the BSE data shows.

RBL Bank had reported a strong 59% year on year (YoY) increase in net profit at Rs 129 crore for quarter ended December 2016 (Q3FY17) on the back of higher interest as well as non-interest income. The bank’s asset quality also remained stable with gross non-performing assets (NPA) as percentage of total assets were at 1.06% in Q3FY17, while net NPA stood at 0.52% on YoY basis.

YES Bank was up 2% at Rs 1,586 after the local brokerages recommended ‘buy’ rating on the stock with upside in the range of 20% to 33%.

YES Bank has been a standout performer over past three years with 3.7x returns, and we expect the outperformance to continue, according to analysts at Motilal Oswal Securities.

“Robust book value (BV) CAGR of 23% (highest in the system), superior RoEs, strong asset quality and increased balance sheet granularity (higher share of retail loans + CASA roll out) should drive a re-rating, in our view,” the brokerage firm said in stock update.

“We increase our 12 month price target by 13% to account for the boost to book value from the recent capital issuance. YES’s earnings and profitability should benefit from the sustained improvement in its liability franchise and diversification in fee-income revenue. Consequently, earnings volatility would diminish over the long term,” IIFL Institutional Equities said in a report.

Yes’s valuation gap with peers should narrow, given its sustained earnings growth and stable profitability over the long term, added report.