Yes Bank's gross NPAs and below investment grade loans zoomed to Rs 41,558 crore ion the June quarter from Rs 30,772 crore in March.
Continued concerns on asset quality has led to another downgrade of mid-sized private sector lender Yes Bank's long term ratings in as many months and has also given a negative outlook.
This is the second such rating action on the bank's outstanding instruments since May and comes amid reports that the bank, now under a new head, is looking to raise core capital to ward off more troubles.
"Rating downgrade factors in the increase in stress, as reflected by a rise in BB- and below-rated exposures and fresh slippages, as well as lack of any resolutions," Icra said in a note July 24.
Yes Bank's gross NPAs and below investment grade loans zoomed to Rs 41,558 crore ion the June quarter from Rs 30,772 crore in March. After provisions, net BB-and below-rated exposures and net NPAs stood at Rs 34,082 crore in the June quarter compared to Rs 24,741 crore in March.
Going forward, credit provisioning is expected to remain high, which will translate into a "moderation in earnings", the agency warned.
Already, the bank, under new chief executive and managing director Ravneet Gill, who succeeded promoter-chief executive Rana Kapoor, who was asked by RBI to leave by January for lapses on the governance front, has showed a massive dent in earnings for two successive quarters.
The bank had reported its maiden loss of Rs 1,506 crore in March quarter and but managed to return to the black in the June quarter with a paltry Rs 96 crore of net income, which was down a massive 92 percent.
"Given the sizeable stressed exposure in relation to the equity capital, the accelerated resolution of these exposures would remain a key rating concern. The inability to reduce the stressed exposure book or a further increase in the same will remain a rating negative," the report warned.
The agency also said the bank's core equity has weakened due to growth in the risk weighted assets and elevated provisioning. Its CET-I ratio slipped to 8 percent as of June 30, from 8.4 percent as of March and 9.70 percent in March 2018, as against the minimum regulatory requirement of 7.375 percent for March 2019 and 8 percent for March 2020.
Stating that the bank has to raise capital on an "immediate basis", the agency doubted its "ability to raise capital considering the recent poor performance". The bank will also need to accelerate resolution and recovery apart from calibrating growth to restore capital cushion, it added.
The agency has seven outstanding ratings on the bank's various instruments worth Rs 52,911 crore and it has downgraded all of them with negative outlook.
Credit challenges include decline in operating profitability on account of interest reversals and moderation in fee income, spike in gross NPAs, a weakened capital cushion, high share of wholesale liabilities which pushes up interest rates and a high concentration of corporate sector in its loan book, the agency said.
On the positive side, the noted the focus on getting loan book broad-based and stable deposit profile.
Yes Bank scrip lost another 1.71 percent to close at Rs 89.15 on the BSE as against a 0.36 percent correction on the benchmark. Prior to Kapoor's ouster, the bank scrip was trading at Rs 404 on August 20, 2018-a day before the RBI turned down another term to him.
