Introduction

Indian banks have compared favourably on growth, asset quality and profitability with other
regional banks over the last few years. The banking index has grown at a compounded annual
rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index
for the same period. Policy makers have made some notable changes in policy and regulation to
help strengthen the sector. These changes include strengthening prudential norms, enhancing the
payments system and integrating regulations between commercial and co-operative banks.
However, the cost of intermediation remains high and bank penetration is limited to only a few
customer segments and geographies. While bank lending has been a significant driver of GDP
growth and employment, periodic instances of the “failure” of some weak banks have often
threatened the stability of the system. Structural weaknesses such as a fragmented industry
structure, restrictions on capital availability and deployment, lack of institutional support
infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations
beyond Scheduled Commercial Banks (SCBs), unless addressed, could seriously weaken the
health of the sector. Further, the inability of bank managements (with some notable exceptions)
to improve capital allocation, increase the productivity of their service platforms and improve the
performance ethic in their organisations could seriously affect future performance.

Banking Industry

The Reserve Bank of India (RBI) has

well-formulated regulations for the Indian
banking sector. A good mix of public and
private sector banks provides stability and
growth to the economy. In addition, non-
banking financial institutions, co-
operative banks, primary agricultural
societies etc., are spread across the
country to meet local needs. Globalization
and liberalization of the Indian economy,
and the interest of foreign banks to expand their
presence in India through the inorganic route,
have fuelled the growth of the banking industry.
The banking penetration calculated on the basis
of total number of credit accounts to total
population was 9.4 per thousand in 2007–08.1

1
Source: “Report on trend and progress of banking in India 2008–09”, RBI website, www.rbi.org.in, accessed on
September 23, 2010 NPA —Non-performing assets, RoA —Return on assets
Credit demand from corporate organisations has helped maintain credit growth in recent years.
Upside risks to inflation and liquidity might call for interest rate environment to remain at
current levels in the near future, thus, impacting the credit growth further.2

Sharp growth in term deposits during 2006–07 was observed as

banks rely more on these deposits than finance
advances. Growth in savings deposit is expected
to increase by an increase in the amount per
account and a steady increase in the number of
savings accounts as banks reach out to new
markets.

Key Trends3

2
Source: “Report on trend and progress of banking in India 2008–09”, RBI website, www.rbi.org.in, accessed on
September 23, 2010.
3
www.ibef.org/download/Banking_060710.pdf
Private Sector Banks

In this type of banks, the majority of share capital is held by private individuals and corporates.
Not all private sector banks were nationalized in in 1969, and 1980. The private banks which
were not nationalized are collectively known as the old private sector banks and include banks
such as The Jammu and Kashmir Bank Ltd., Lord Krishna Bank Ltd etc.4 Entry of private sector
banks was however prohibited during the post-nationalisation period. In July 1993, as part of the
banking reform process and as a measure to induce competition in the banking sector, RBI
permitted the private sector to enter into the banking system. This resulted in the creation of a
new set of private sector banks, which are collectively known as the new private sector banks. As
at end March, 2009 there were 7 new private sector banks and 15 old private sector banks
operating in India.5

There has been a gradual shift in business from public to private and foreign banks.

The banking
system in India is

4
Some of the existing private sector banks, which showed signs of an eventual default, were merged with state
owned banks.
5
It may be noted that two important erstwhile developmental financial institutions, viz. Industrial Development
Bank of India (IDBI) and Industrial Credit and Investment Corporation of India (ICICI) converted themselves into
commercial banks after the new bank licensing policy was announced in July 1993.
dominated by Scheduled Commercial Banks (SCBs) with a pan-India presence. As of March
2009, SCBs controlled most of the assets, with the rest being controlled by a large number of
small co-operative credit institutions with a very limited geographic reach.

Within SCBs, public sector banks accounted for 71.9 per cent of the assets and the rest was held
by foreign banks and private sector banks.

About YES BANK

YES Bank India is a new age private sector bank in India. Founded by Rana Kapoor with a goal
to set up a high quality, customer centric, service driven private sector Indian bank that would
cater to the "Future Industries of India". It is also the only bank that has been awarded Greenfield
license by the Reserve Bank of India in the past 14 years. The bank offers a range of financial
products and services to its clients, which include Corporate and Institutional Banking,
Investment Banking, Business and Transaction Banking, Financial Markets, Corporate Finance,
Retail and Wealth Management etc.

YES Bank Limited follows international best practices, premier standards of service quality and
operational excellence and use highest technologies to provide comprehensive banking and
financial solutions. Its knowledge driven approach is one of its key strengths. The operations of
bank are based on 7 features, viz. Financial Trust, Human Capital, Knowledge Bank, Technology
Edge, Corporate Governance, Responsible Banking, and Growth. YES Bank India is also
associated with various global thought leadership forums including Triple Bottom Line Investing
(TBLI), the Clinton Global Initiative (CGI) and Tallberg Forum etc. It's also become a signatory
with the United Nations Environment Programme. YES Bank India is the first Indian bank to
achieve the feat.

YES BANK has invested in the best IT systems and practices in order to make its technology
platform a strategic business tool for building a competitive advantage. The Bank has outsourced
a significant part of its technology, infrastructure and hardware requirements, which has
enabled the Bank to achieve high standards of customer service at comparatively lower cost
structures. YES BANK is committed to executing a concerted strategy by continuously
launching innovative and secure banking channels to enhance customer satisfaction and increase
focus on providing convenience and choice to our clients. The Bank has partnered Obopay USA,
to launch secure mobile payment solutions for the first time in India.

YES BANK has been recognized amongst the Top and

the Fastest Growing Bank in various Indian
Banking League Tables by prestigious
media houses and Global Advisory Firms,
and has received national and international
honours for our various Businesses
including Corporate Finance, Investment
Banking, Treasury, Transaction Banking,
and Sustainable practices through Responsible Banking. The Bank has received several
recognitions for our world-class IT infrastructure, and payments solutions, as well as excellence
in Human Capital.

Shareholding Pattern (As at June 25, 2010)

Significant Developments 2009-10

Technological Innovations as a part of CRM

YES BANK, India's new age private sector bank focused on innovative banking solutions, today
unveiled the first of its kind, 'Bank Branch of the Future' at its South Extension Branch in New
Delhi. The Bank Branch of the Future aims to transform retail branches from simple
transaction outlets to 'Service Oriented Advisory Centers' thus shifting the focus from
providing vanilla transactions to high-end value added services through the innovative use of
technology and futuristic branch design.

YES BANK introduced the innovative use of Radio Frequency Identification Device (RFID)
for the first time in Indian Retail Banking that allows for personal identification of customers
at the Branch, thus enhancing customer experience. Specifically, this is achieved by inserting a
RFID microchip into the debit card of customers which transmits relevant customer information
to relationship managers while the customer enters the branch.

YES BANK is amongst the

 First Bank in the World to create a Wi-fi banking network

 First Bank in India to create Automated Teller Cash Dispenser systems enabling faster
and accurate cash dispensing from Teller workstations.
 First Bank in India to offer Single PIN access to all delivery channels
 First Bank in India to offer Two Factor authentication on soft token to net banking
customers
 First Bank to offer speech enabled voice recognition Phone Banking services
  First Bank in India to offer online account aggregation services to customers

Products and Services

YES Bank India offers a range of products and services to its clients across the nation.

 Corporate Banking
 Institutional Banking

Corporate Finance Branch Banking

o Infrastructure Banking Unit (IBU) o Saving Accounts
o Structured & Project Unit (SP&F) o Current Accounts
o Financial Restructuring Unit (FRU) o No-frills Accounts
o Realty Banking Unit o Non-resident Accounts
o Project Advisory & Syndication Unit o Fixed Deposits
o 5-Year Tax Efficient Fixed Deposits
o Smart Saver Accounts
o Smart Salary Accounts
YES FIRST Wealth Management Investment Banking
o ZERO Balance GOLD Savings o Private Equity Syndication
Account o Financial Advisory
o Life and General Insurance o Equity Capital Markets
o Mutual Funds/ Portfolio Management o Restructuring & Privatizations
Services o Brokage Services
o Demat Accounts
Financial Markets Transaction Banking
o Foreign Exchange o Cash Management Services
o Online Forex Solutions o Capital Market Services
o Fixed Income o Trade Services
o Derivatives & Structured Products o Trade Finance
o Commodity Risk Management o Address
Advisory
o Liquidity & Balance Sheet
Management
Technical Analysis

Key Financial Highlights of YES BANK FY-10

Balance Sheet Growth

Mar 31, 2010 Mar 31, 2009 YOY % Growth

(Rs.million) (Rs.million)
Advances 221,931 124,031 78.9%
Investments 102,099 71,170 43.5%
Total Assets 363,825 229,008 58.9%
Shareholders Funds 30,896 16,242 90.2%
Tier I + Tier II Capital 52,570 30,674 71.4%
Deposits 267,986 161,694 65.7%

1. Advances at Rs. 221.9 billion as at Mar 31, 2010; Growth of 78.9% y-o-y
2. Gross yield on advances of 10.8% in FY10 (12.8% in FY09)
3. Deposits at Rs. 268.0 billion as at Mar 31, 2010; Growth of 65.7% y-o-y
4. Cost of funds of 6.9% in FY10 (9.0% in FY09)
5. Net Interest Margin of 3.1% in FY10 (2.9% in FY09)
6. Return on Average Assets of 1.60% in FY10 (1.5% in FY09)
7. Return on Equity of 23.7% in FY10 (20.6% in FY09)
8. Basel II Capital Adequacy Ratio of 20.6% at Mar 31, 2010 (Tier I at 12.9%)
9. Total Capital Funds (Tier I + Tier II) of Rs. 52.6 billion as at Mar 31, 2010 (Rs. 30.7
billion as at Mar 31, 2009)
10. Book value per share of Rs. 90.96 as at Mar 31, 2010
11. Basic and Diluted EPS of Rs. 15.65 and Rs. 14.87 for FY10
12. CASA grew by 99.6% y-o-y to Rs. 28.2 billion in FY10 (10.5% of deposits)
13. Gross NPA at 0.27% to Gross Advances as at Mar 31, 2010
14. Net NPA at 0.06% to Net Advances as at Mar 31, 2010
15. Total loan loss coverage ratio of 274%; Specific loan loss coverage ratio of 78.4% as at
Mar 31, 2010.
16. Total restructured advances were Rs. 800 million (0.36% of Gross Advances) as at Mar
31, 2010 from Rs. 1,340 million in Dec 31, 2009 (0.71% of Gross Advances) showing a
decline of Rs. 540 million

Maiden dividend of 15% per share recommended by the Board

Credit Deposit Ratio

2009-10 2008-09
Advances (Rs.million) 221,931 124,031
Deposits (Rs.million) 267,986 161,694
Credit Deposit Ratio (%) 82.81 76.70
The credit Deposit ratio of the bank has significantly increased which is good and also shows the
efficiency of the bank in converting the idle funds into the useful funds.

Capital Adequacy Ratio

2009-10(Rs. 2008-09(Rs.
In InThousands)
Thousands)
Tier I (Capital) 32,775,941 17,529,573
Tier II (Capital) 19,794,338 13,144,084
Total Capital 52,570,279 30,673,657
Credit Risk – Risk Weighted Assets (RWA) 234,907,519 167,742,944
Market Risk – RWA 9,991,399 9,996,677
Operational Risk – RWA 10,225,395 6,751,364
Total risk weighted assets 255,124,313 184,490,985
Tier-1 capital adequacy ratio (%) 12.9 9.5
Tier-2 capital adequacy ratio (%) 7.7 7.1
Total capital adequacy ratio (%) 20.6 16.6

As at March 31, 2010, the Bank is required to maintain minimum capital which is higher of the
minimum capital requirement under Basel II framework or 90% (100% as at March 31, 2009) of
the minimum capital requirement under Basel I framework. As at March 31,2010, the capital
funds of the Bank are higher than the minimum capital requirement mentioned above.

Revenue Profit Growth

FY 10 FY 09 Y-O-Y % Growth
Net Interest Income 7,880 5,093 54.7%
Non Interest Income 5,755 4,709 22.2%
Total Net Income 13,635 9,802 39.1%
Operating Expenses 5,002 4,185 19.5%
Operating Profit 8,633 5,616 53.7%
Provisons & Contingencies 1,369 957 43.0%
Provison for Tax 2,487 1,621 53.5%
Net Profit after Tax 4,777 3,038 57.2%

1. Net Profit after Tax of Rs. 4,777 million in FY10 compared to Rs. 3,038 million in FY09
representing an increase of 57.2%

2. Net Interest Income (NII )of Rs. 7,880 million in FY10 compared to Rs. 5,093 million in
FY09 representing an increase of 54.7%

3. Total Net Income(NII plus Non Interest Income) of Rs. 13,635 million in FY10
compared to Rs. 9,802 million in FY09 representing an increase of 39.1%
 4. Operating Profit of Rs. 8,633 million in FY10 compared to Rs. 5,616 million in FY09
representing an increase of 53.7%

5. Non Interest income to Total Income ratio of 42.2% in FY10 Cost to Income ratio of
36.7% in FY10

Breakup of Non Interest Income

Business Segment FY 10
Financial Markets 35%
Transaction Banking 24%
Financial Advisory 34%
3rd Party Distribution, Retail Fees and Others 7%

Spread

2009-10 2008-09
Interest Earned 23,697,097 20,014,348
Interest Expended 15,817,570 14,921,356
Spread 7879527 5092992
Total Expenses 24,675,024 21,344,937
Spread as % of total 31.93% 23.86%
Expenses

Consistent Financial Performance over the past 5 years

Conclusion

Yes Bank has really achieved such a huge balance sheet size in very few years. What HDFC was
able to achieve in 8 years Yes Bank has achieved it in just 5 years. Its balance sheet growth and
revenue growth is significantly high compared to the last year. Its tear on year growth shows its
efficiency in turning a ordinary customer into a profitable customer. Moreover with the help of
its latest technological innovations it has able to fulfill the CRM activity into full fledge.

RBI recently granted YBL 91 additional branch licenses. These, coupled with the current
network and opening of some branches in Tier III/Tier IV cities is expected to take the branch
network to over 250 by June 2011. YBL is also the first Indian Commercial and Retail Bank to
receive certification for its "Quality Management Framework (ISO 9001:2008)" across 100
branches in the country by Bureau Veritas (Global Leaders in ISO Certification) as on 31st
March 2010.Wih a view to earn income from the various other sources Yes bank has also tied up
with leading Brokerage Houses, Tie ups – Bajaj Alliance Wellness cards, Mobile Money with
Nokia, FDC, Online banking/ Direct Banking Platforms, Retail Broking business, Offshore
Branch, Scaling up CD program

YES BANK is also known as “The Professional Bank of India” and in the FY 10 it has been the
preferred choice for the Top B-Schools in India (153 students from Top B-Schools).